You can apply outland even though you're both in Canada because there is no requirement within outland to be living together at the time of application. On the other hand, inland requires that hence it's legit they will refuse you under inland class.
Since you're still intending to remain in the same situation for the coming months, you may resubmit the application under outland category from within Canada.
Do you think that this is the only reason for the rejection?
Do the sponsor usually get sponsorship approval in a few days after they submit the application? which i did not get and it was worrying for me and it ended up like this.
Time line below:
Application sent early Jan.
Received by CIC on Jan 15.
Schedule A and police cert. requested in Feb and was submitted in a few days.
medical request on july and was submitted within deadline.
If you see my timeline I never got any approval from my cic that am eligble to be a sponsor until today. Is there anything weird in this timeline?