You don't understand the rules correctly.
Only embassy and consulate grounds are considered and treated as foreign soil (that includes buildings that house recognized embassies and consulates). He is living as a guest in base housing or in a normal house nearby, all on American soil. His flying of the Canadian flag, as if it were sovereign, is insulting and contrary to all diplomatic tradition. He is openly violating international norms and protocols and being deliberately provocative or he is incredibly ignorant and grossly unqualified for his post.
Contrary to his argument he would only be entitled to fly the Canadian flag while in the US as he does if Canada had beaten us in a war. We won a war in Iraq and Afghanistan and are thus entitled, but we have gone out of our way to never display just the US flag as a sign of respect. As a guest in our country he has no right to fly his flag alone (implying sovereignty) unless he is doing so in an officially recognized diplomatic compound. His home on a US base or in a US neighborhood emphatically does NOT qualify.
This was explained to me by the then legal adviser to the Irish Embassy at the UN as to why he flew both the US and Irish national flags outside his rental home next to my parent's house in Scarsdale, NY, when I was growing up. He later went on to be the Irish Ambassador to several countries, finishing up as Ambassador to the US and then the USSR. In this last post he acted as a friend of the US as Ronald Reagan's "honest broker" to set up the START meetings with Gorbachev. I'd say that career qualifies him as an authority on the subject, so I'll defer to him.
The Canuck is wrong and should either strike his colors or fly the US flag as prominently OR ABOVE the Canadian flag in order to show proper respect for his hosts. Having looked at the picture of this lard ass I don't think he has the proper respect for his own country, let alone ours, so I don't think he'll exhibit the class to do any such thing. Unfortunately he is all too typical of the whiny and spiteful "ugly Canadian" that is being presented to the best friends that Canada has ever had or ever will have.
Unless the election tomorrow makes for a very rapid and very public turn around in the public position of Canadians towards America and Americans I think that the Canadians are in for a very rough couple of decades as they find out just how well they can get along depending on their own capabilities. I think they'll find that they've been living off of a rich relative for a long time and it will be a rude awakening for them when they get cut off. It will be a bitch for us, but it will spell death for them.