These rankings rely so heavily on research and reputation for scoring that you shouldn't look at it as an indicator of a university's academic quality.

That would be the reason U of T is ranked so highly; they are even amongst competitive Ivy League schools!

When I was applying for university (2007/08) U of T was handing out acceptance letters to everyone. Instead of rejecting you they would offer a place at a "lesser" campus (Mississauga or Scarborough) or defer you to a less competitive but related program. They are the largest university system in the nation with lots of spaces to fill so the scenario you described (getting accepted by the "#1 ranked school in Canada" and rejected by another") actually happens quite a lot.

As for Waterloo, they're hardly a well rounded school. Yes, their engineering and computer science departments are internationally renown, but otherwise they are 2nd tier.

Whatever the metric for rankings, I still think U of T is the best school in Canada. Just maybe not top 20 in the world.