From my perspective I just don't see any new lines running through DT that are not underground. Not that I don't believe it couldn't be done, I just believe that not doing it would doom the line on so many levels, not the least of which would be driver revolt. Next, I think that an alignment Center street or thereabouts is the best approach to DT. It fits much better with how people are looking at transit these days.
Having said that, I do agree with Policy Wonk that by no means is the Nose Creek alignment dead. 20 years is a long time.
The tidbit I would really like to contribute to this discussion that doesn't seem to be already out there is that of changing demographics. The projects we're seeing now are largely driven by the priorities of a generation that was in love with the car. That's slowly changing with successive generations and thus we are seeing a gradual shift in the thinking of people to a city where there is at least an consideration towards alternate modes of transit. If the peoples priorities continue the shift, governments in 20 years might be much more open to spending the money. Adding to that, when you start to factor in issues around climate change and a (eventual) price on carbon, suddenly it's not unrealistic to imagine even Alberta finding economic value in funding some of these projects.
Or not...