Opinion in Canada is divided between the monarchists and anti-monarchists. The latter consider the entire Royal Family to be nothing but parasites and want Canada to boot them after the Queen dies (there is something to be said for not wanting to have to look at Charles' face on our money). Of course there are constitutional considerations, and some of the antipathy is just because there are a bunch of right-wingers (mostly male) who despise our current Governor-General (one of the most accomplished women in Canadian history, Julie Payette is a modern-day Renaissance woman who could have had successful careers in a wide variety of fields, and her most recent career pre-GG was as an astronaut). Some of her detractors have said that Harry should be appointed as GG (Which is why I'm a bit confused as to why they didn't cut off all their princely funding. She is also independently wealthy as well.
I think it's a good move for them in the long run if they follow through and get off royal funding entirely but this half-measure seems...awkward.

Then there are people who understand that Harry doesn't want his wife to suffer the same insane pressure from the paparazzi as his mother did. Nobody in Canada cares about Meghan's race or ethnicity (other than to wonder what citizenship options she has if they decide to live in Canada, since she's American). Speculation is that if they do move here, they would probably live either in Vancouver or on the island.
Actually, the most contentious concern in Canada is centered around whether, and how much, Canada would be expected to pay for their security expenses. We do pay for security when there's an official Royal visit, but if they come here as private people, that's a different thing that nobody's sure about.
As far as half-measures... I can understand not wanting to cut all ties immediately, since this is a new thing and they want to get it right. It's not like the situation where you have the king abdicating and being kicked out of the country. Harry is nowhere near the throne anymore, and this is a situation he and Meghan initiated themselves.