So, I just called Air Canada (because I had a question regarding an upcoming flight later this month) and then also asked about this situation.
Foreign national that is already in Canada, and has applied for permanent resident status, flying from Victoria to Ottawa with expired identification:
The agent was less than friendly and was quite adamant that a VALID passport would be required, because the traveller is a foreign national.
Sometimes (I guess it depends on the mood of the ticket agent) a Canadian can travel domestically with an expired ID, but not those from other countries.
She went on to say that travelling commercially (including by bus) would likely be impossible.
Maybe she was wrong, because before making the call I was reading through this:
http://www.flyertalk.com/forum/canada/635909-expired-passport-photo-id-within-canada-ok.html
(granted many posts are a few years old, but...)