Although it felt like a loss (due to the buildup in pre-election polls), the Conservatives did gain in the election. The Liberal government will fall within 1 or 2 years. Hopefully the Conservatives won't infight themselves to death and boot out Harper. Harper needs to prove himself to the eastern voters as the next potential Prime Minister. The voters fell for the Liberal scare tactics this time. It's similar to what the Dems pull on retired folk about social security every election cycle. Eventually the scare tactics won't work and there will be a Conservative government voted in. Too bad it wasn't on June 28 2004.
As for Canada, it won't ever join the US. It may adopt the greenback but even that would be decades off. Canadians are quietly but fiercely patriotic. And they remember in their history books how they beat back the American invasion of Canada in 1775 AND burned the White House down in 1813. History shows - don't mess with those hosers.
It would be an act of incredible stupidity to merge the two governments. Both Canada and the US are too large as it is. Even as it is, the geographical differences in America's politics shows that we'd all be better off if our geographic regions were given self-government.