Wherever possible, have it (LRT - subway) running under parks (such as the commons and edge of the Citadel) and boulevards to minimize interference with services (roads, sewer, and electrical). It still must run along high traffic areas though.
I think that a major LRT project in the Halifax area (something similar in cost to the Harbour Solutions project) would bring long term benefits to the Halifax area. This is the sort of project that can get federal funding. Except it is best to do it right and have it all ROW (preferably underground). A short system could service Dalhousie U. and SMU, the hospitals, downtown and West Mall. From the West Mall it could eventually service Bedford and Timberlea (with heavy rail to Bedford and possible beyond). Bedford and Timberlea are likely in the distant future but the downtown to West Mall route should be considered immediately.
High density apartments and offices should be allowed along the entire LRT route. I just realized that this is the BRT thread. I don't think BRT will ever get the ridership of LRT. Philadelphia has a nice (mostly above ground system) called Septa (I was on the Regional Rail line). It is an older style but very smooth and comfortable and it runs within the city (and beyond, to the suburbs and airport). I am not sure if this would be referred to as heavy or light rail.