Yep, it's true.
It was to be the Chateau Qu'Appelle Hotel, 10 story talls, and a fine looking hotel at that. It was the Grand Turck railway hotel.
WWI halted construction of the hotel, and the company went bankrupt in 1919. The material that had been erected was eventually taken down and used for the construction of the Hotel Sask in 1927.
Rather than changing around the foundation, they elected to just build the museum on what was already there.
Actually here's a wikipedia article on it.
http://en.wikipedia.org/wiki/Chateau_Qu'Appelle
Eeek, sorry for hijacking the thread!