just discovered TM a couple days ago and well, it's a pretty addicting read lol. although, i'm simply an engineering undergrad at waterloo, and i'm looking more into grad studies in econ, i'll just say this about waterloo. the relationship that waterloo holds with the companies w_guy has mentioned are pretty strong. i personally have had a few friends who've worked at the names such as nvidia, ati, amd. a bunch have been at MS, sun, google, apple. i feel like half of RIM is actually comprised of waterloo co-ops. a lot also go into the financial sector.
anyhow, my point is, the school attracts ambitious talent at the undergrad level. it's competitive yet friendly. imo, our campus is butt ugly in terms of architecture (with the exception to ECIT, where many ECE offices/lecture rooms are shared with a dinosaur museum
). the campus is relatively on the small side. in my experience it's very much an open door policy with profs.
as for waterloo... it's a small town. it's a university town. kitchener is close by but is what i would say, a small city or a big town.
i don't know how the quality of grad schools stacks up vs. UofT. I would speculate (but really have no formal evidence) that if your prof would be more correct in that UofT would have superior programs at the grad level.
i was merely trying to give a perspective of the campus.