I'm Chinese and I have a Canadian passport so I don't need a Japanese visa to get to Japan right? (For sure staying less than 3 months)
If you have a Canadian passport, you will probably have no trouble getting a
visitor visa when you go through immigration (in Japan).
Is it easier to fly into Tokyo Narita or Osaka Kansai? For those living in Tokyo, is it easier to take a taxi from the airport or to take the "express train". We're hoping to travel light so I';m thinking train all the way.
That depends on what you mean by "easier," it depends on where you'll be
spending your time. It sounds like you want to go to Tokyo, so Osaka would be way out of your way (and possibly more expensive to fly to). Take the train, Narita is NOT in Tokyo, and will cost you about 30,000 yen to get to the city.
I found a cheaper hotel for foreigners in Ikebukuro. How much time is required to process online reservations in Japan? Do I need to leave a deposit?
can't really help you there, but I dodn't remember there being a deposit. Reservations shouldn't take too long; I would think even a few days would be sufficient, but a week or more would be safe.
Is Japan really that expensive? We're probably thinking of one restaurant splurge and then eating onigiri and bento a lot. (with the occasional katusdon thrown in as a treat) No, no Kaiseki-ryori.
We're also planning to see Akihabara and see the otaku in action. (no offence intended to Japanese who don't like anime, I don't either but its so "famous" I want to see it.)
Japan is probably on par with Canada and the US in terms of food. If you are going for a short period, spend wisely, but don't live like a waif. There's no point in travelling abroad if you're not going to be able to enjoy yourself and try the local dishes.
Is it true that you can't eat walking on the street?
no one is going to stop you, but the preference seems to be to sit down to enjoy your food, no matter what it is.
Finally:
Will we (my friend and I hoping to make this trip are chinese) be mistaken for locals? That is problematic as we cannot by any means speak Japanese. Thankfully I know the kanji for english, china, and canada. (Eigo, CHugoku and Kanada right?)
Sorry, but you will likely not be mistaken for locals. Chances are, your clothes, mannerisms, and attitude will flag you as a gaijin of some sort. It could happen, but chances are slim.
Not knowing kanji will be a challenge, but tourists come through all the time without any language ability and get by just fine. Also, although there is kanji for Canada, it's used far less often than the katakana version.
good luck and enjoy your journey!