If you apply inland and submit an Open Work Permit app along with the PR app, he will have Implied Status allowing him to stay in Canada throughout the processing time. However, with an inland app, he will need to stay in Canada the whole time (processing time is around 19 months right now). If he left Canada during the processing and was then refused entry back in, the app would be cancelled.
If you apply outland, as said above, he would need to maintain his status as a visitor. It is very unlikely that his extension would be rejected, provided you include proof you can support him and proof of the PR app. He can request a longer extension, I would suggest he ask for a year.
Some advise using the Canadian address for the mailing and the home country address for the residential but quite a few people in Canada as visitors have used the Canadian address for both with no issues. For IMM0008, where it asks for "Current Country of Residence", the guide states "Your country of residence is the country in which you are residing, provided that you have been lawfully admitted to that country". There is no qualifier that a person must have been admitted for a minimum amount of time or on a certain type of visa, only that they have been legally admitted to the country. Your husband is currently residing in Canada as a legally admitted visitor.
As well, many people apply outland while outside Canada, then come to Canada during the processing and change their address to their Canadian one while still a visitor. CIC has no issues with that.