Although a flash-cut to digital would make things easier for the stations, it is not without its disadvantages. In a staged transition if there are any problems with the digital broadcast, there is always an analog broadcast to fall back on. I also think (yes it is my personal opinion here) there is a greater risk of people being caught after the switch without a digital tuner in a flash-cut.
Don't forget that after the US analog shutdown in 2009, there will be lots of used broadcasting equipment on the market, especially equipment for out-of-core allocations. This should reduce transition costs significantly.
The more I think about it, the more I think that instead of having one analog shutdown date for the entire country, there should be different analog shutdown dates for different sized markets (larger sooner, smaller later). Broadcasters in Toronto could almost match the US shutdown date of 2009 (maybe 2010), where as broadcasters (or repeaters) serving very small markets could be allowed to continue broadcasting in analog for many years. I am thinking of 3 to 5 cities (maybe 10 during the peek) being required to shutdown their analog transmitters each year. My thinking is it could go something like this (based on 2005 population estimates
2010 - Toronto-Hamilton
2011 - Montreal, Vancouver, Ottawa–Gatineau
2012 - Calgary, Edmonton, Quebec City, Winnipeg
2013 - London, Kitchener, Halifax, Victoria, Windsor
and so on (you didn’t expect me to list every city in the country did you?
This would be good for large networks (especially the CBC) for several reasons. It would give them more time to both focus on doing each transition properly (the same crew could do multiple transitions) and amortize the costs of the transition. Also, some of the redundant equipment (amplifiers, antennas and such) could also be re-used for multiple transitions.
It would also be good for the smaller, independent stations, as the ones in larger markets could sell the redundant equipment to ones in smaller markets to recoup some of the costs (or third party companies could rent out the equipment). Also, people involved in the earlier transitions could be hired for their experience as consultants during the later transitions. It would also give many of the smaller stations more time to raise the capital needed to perform the transition.