The arrest of Meng Wanzhou was never meant to seem legitimate imo, the point was power projection. "Don't fuck with us."
I don't think the moral high ground means much in geopolitics. Power is way more important. "Better not curtail us, it'll make you seem mean..." This is the US we're talking about, known around the world for turning half the middle east into a desert. That's really not their primary concern.
That sounds like an excellent way for the US to torpedo their relationship with Canada, as if the trade war and COVID response isn't doing enough already. Canada's stance on the arrest is based on its legitimacy and the impartiality of the judiciary. The public will be outraged if it comes out that we've had to suffer China's wrath for a political stunt by the US.
You're putting a lot of weight on positive relations rather than power. I'm just not convinced. The US is substantially more powerful than Canada, so they can bully Canada. Canada doesn't really have the option to turn them down as an ally.
For example, I don't think the trade war did damage relations with Canada - if what you're measuring is tangible results, rather than sentiment. From what I can tell, the US basically said, "give us a better deal, now. Also we're boycotting China." Canada said "I don't want to. But OK," and then... Nothing else changed. The US won, and Canada didn't reprimand them. Results > sentiment.
Forcing Canada to choose between the US and China is absolutely a strategic option for the US, and possibly an important move to make given how heavily China is invested in Canadian property. America doesn't want China getting a foothold on their continent. Even if it pissed off the Canadian public... So what? What are the practical results?
Note the US is currently embroiled in similar situations with Britain (Assange & the Hit & Run Diplomat). They practically forced the UK to join the war in Iraq, which pissed the UK public off way more than Weng Menzhou - doesn't matter. They won, & the UK is still a (staunch) ally.
I don't think the moral high ground means much in geopolitics. Power is way more important. "Better not curtail us, it'll make you seem mean..." This is the US we're talking about, known around the world for turning half the middle east into a desert. That's really not their primary concern.