hey Chandu007, Once, I also called CIC office regarding this issue and they told me that as long as the PR application is in process, the sponsored applicant can stay in Canada legally even though the visitor status has expired. However, I think it is good idea to have the visitor status extended because it is easier to show legal status with that document. You will need to pay application fees but I think it is worth it. That's just my view.
When I applied to sponsor my wife by Inland process, I included the application to extend her visitor status. She received her visa extension after about 3 months. The visitor status was extended for one year. Your spouse does not need to leave Canada to apply for visitor status extension. In fact it is not recommended for the sponsored spouse to leave Canada before his/her PR is approved.
!! have a great day !!