Legal status, in your case, basically means that you are here as a visitor. You'll either have a stamped passport (good for up to 6 months) or a Visitor Record, which you might receive when you cross the border. It means that if the border guard stamped your passport 7 months ago, you're still here, and you didn't apply to extend your stay, you're technically here illegally.
You can change your address to your Canadian one. Applying outland, as we've beaten to death in this forum, doesn't mean you can't live in Canada. It just means you have to ensure you're maintaining that legal status (i.e. visitor status) as per above.
As far as correspondence goes...it's something like this:
-your sponsor will be emailed about his application being opened.
-your sponsor will (presumably) get an email saying his sponsorship is approved, and that the application is now transferred to somewhere in the U.S., or possible the Ottawa Case Processing Pilot
-you will get nothing until they request a copy of your passport (this is months down the road) which they will do by email
-when your online status goes to Decision Made, you then start to camp out by
your mailbox for your COPR (Confirmation of Permanent Residence).
This is all, of course, assuming a cut-and-dry case. It's possible there will be slight variations to what I've said above