Right down the street from my favorite pho place, Gwartzman’s has been my go-to place for art supplies for quite a few years now. It’s a bit of a hole-in-the-wall, but they offer good breadth of products and friendly service.
They have sketching, painting and crafting supplies. I was just able to get a huge roll of paper to use as a photo backdrop for only $10. Great prices on artpads and art paper books.
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blogTO just posted a list of their top art supply stores:
http://www.blogto.com/toronto/the_best_art_supply_stores_in_toronto/