Full discloser, I live in Montreal and work in this industry as a consultant so my opinions are not just that of another homeowner.

Your worst option (aside from doing nothing) would be to add a heat pump to your existing oil furnace even with the Hydro DT rate. The reasons being that even though you will be told that you only use oil when you switch over at -12ÃÂC with the DT rate, this is in fact NOT true. Every time the heat pump goes into defrost mode (perhaps every 1-hour to 1-1/2-hours), irrespective of outdoor temperature, you will be burning oil, lots of it. I base this on my neighbour's experience that has the same brand/vintage furnace as you. In addition, you still have the oil tank issue that, as you know insurance companies don't like. That when it's time to sell, in the Montreal area there are real estate agents that won't even show homes that are oil heated. This I discovered through a client that had discussed her heating options with friends that are agents, of course that doesn't mean your house won't sell, it just means that you are at a disadvantage.

Your best options are either all-electric with heat pump or gas furnace with heat pump and the Hydro DT rate. Either system should be as efficient as possible with variable speed blowers. Neither of these options will qualify for any rebates from either Hydro Quebec or Gaz Metro.

Carrier Infinity would be an excellent choice with Carrier Infinity Greenspeed being best.

There are presently substantial rebates being offered to convert from oil to geothermal.

Today's prices for heating oil (Nov. 23, 2012) in the Montreal area are as high as $1.09 per litre - $1.25 per litre with tax!

SR

What are the gas and electric rates? It may not be worth pairing a heat pump with a high efficiency gas furnace. The OP may never see a pay back of the heat pump.

Switching to gas hot water heater would also lower your domestic hot water costs. You should consider this when weighing the various options.