My spouse is on a closed work permit which is expiring on Sep'2014 and
I am on a SOWP which is expiring on Sep'2014.
But there is certain situation in my spouse's company , for which (in the worst case) ,contract may get close by May' 2013
We will be applying for PR under the new CEC rules on April'2013.
The estimated time to get the PR as per CIC website by this is 13 months.
Now, our questions are, in that case
1.can we stay in Canada and apply for BOWP while we wait for our PR decision.
You can stay in Canada but with your spouse's current work permit, you would not be eligible to apply for the BOWP until June 2014 (you would probably have a decision on your CEC application by then). But your husband would not be able to work unless he found a new employer, got a positive LMO, and then got a new work permit. You would be able to continue working until the expiration date as long as your spouse remains in Canada.
2.How do we extend our VISA in that case along with the BOWP.
You can apply for a TRV. It is a separate application.
You do not need the TRV to stay in Canada, you only need it to enter from outside Canada.
http://www.cic.gc.ca/english/information/applications/visa.asp
3.Can we travel outside of Canada for vacation during that 1 year, or that can cause some problem when we would try to re enter.
If your spouse is no longer employed and does not get a new LMO/work permit, your SOWP is only valid as long as s/he remains in Canada. So if you travel outside Canada, you would be taking a risk of being refused re-entry.