Darkling, why can't some people cope with basic reality that if the US was ripped in two by British action then US attitudes towards the UK would be changed for generations to come?
Which of the following do you dispute?
1) I'm not sure I understand the reason for an expanded military. The South is unlikely to pose a substantial military threat, and is likely to slide into economic insignificance and factionalise. Canada ITTL had its outer defences overrun by American militia. I think that America would have been better served in this period with a larger standing army and navy, though. I can see the Navy being increased and modernised in response to its failure to defend the coastline. Provided the Canadians/British adopt a sensible policy of reconciliation (which is uncertain, of course), there's no need for a large army on that border
either.
2&3) The OTL defence analysis of Canada pointed out that the place couldn't be held in a long war against a single-minded USA. The only sane option is closer ties. Of course, plenty of war's are utterly insane, but still . . .
4) While the quick intervention might not change matters significantly in Europe (though I have my doubts, given France's penchant for miraclulous defensive weapons IOTL), there's the potential for France to have messed about with Mexico to a far greater degree than OTL. That'd really change the geopolitical balance of power from OTL.
5) A refusal to sell materiel (presumably Federal legislation prohibiting private companies?) or accept British financial assurances would be very bad news for the Entente (well, they couldn't prosecute an offensive war, losing lots of men). However, I am
not convinced of the inevitability of WWI ITTL. IOTL it took state-sponsored assassination, prize idiocy from half a dozen national governments and a lot of little niggling minor details to cause it. I wouldn't say such a war is impossible, but I question how closely it'd follow OTL.
6&7) Didn't America do this IOTL?
8) Sounds a bit like Britain surrendering basing rights in WWII to America in exchange for this and that. As for territorial adjustments, it's worth noting that Canada is surely independent by this time.
Perhaps I'm just being blind, but I don't see how the events laid out here make British actions responsible for America being ripped in twain.
America is in the middle of a civil war. Then she picks a fight with the British, even invading Canada. The British subsequently fight back and smash a few coastal bits and bobs. Lincoln and Seward have destroyed
their own economy and cut off
their own access to arms. Britain was quite cheerily selling things before
Trent. Though we do have yet to obtain a consensus on whether Britain would be happy to do so thereafter to a nation that just unreasonably attacked them.