Shipdem said:
Yes we do plan on consulting with a lawyer in the next couple of days. But I am hoping to have a more clear understanding of our options before spending $300/hour on an immigration lawyer. I don't plan on any misrepresentation on the application but if there isn't a record of him entering Canada, then technically there is no proof as to how long he's been here. If he were to drive across and get back into Canada without problem, does that mean he has another six month allowance here? Or does he actually need a visitor's visa to come back in?
I would not bother with the lawyer.
From CIC (http://www.cic.gc.ca/english/immigrate/sponsor/spouse-apply-who.asp):
You can apply as a sponsor if your spouse, common-law or conjugal partner, or accompanying dependent children live with you in Canada, even if they do not have legal status in Canada.
You can file the sponsorship app even if he is illegal. Provided he meets all the other requirements (genuine relationship, no criminal record etc.), his overstay will not affect the decision. CIC doesn't usually deport illegals that have a sponsorship app processing but be aware that it is always a possibility, especially if they suspect the illegal person has been working.
If you wanted to correct his status first, then having him leave and re-enter is the only way. He won't need a visa as he holds an American green card. If he can show proof to the border officers that he will be submitting the PR app (the fee receipt is good) and proof that you can support yourselves without him working, he probably won't have problems re-entering Canada. You can then submit the PR app and not worry about his status.