You're applying Outland when you are living IN Canada?
It does not cancel the PR application since you have implied status as soon as you send your PR application in. It is a good idea though to get the extension (especially if you don't plan on applying for an open work permit - which would grant you status in Canada) just in case anything happens with your PR application -- it is rare that an extension is denied.
I sponsored my husband, who is from the US, and we did a total of two extensions in the entire process. 1 extension to reach a common-law status and 1 more to overlap in case our PR application was sent back for any reason.