Guys
I think the single biggest problem is that if Arnold did do such a military coup then the rebellion would lose a lot of its current support. Many waivers would be alienated by the fact you're basically got a dictator in charge and their colonial representatives, some of their leading citizens killed/arrested.
In that case you would probably get the rebellion restricted to a relatively small number of hard-liners isolated in the wilderness and probably quickly scattered and killed. Even if somehow, even more extensive French aid, a rebellion is won, the anti-Arnoldites are going to be markedly larger in number and the 'free' US will probably be lucky to be half the size it was OTL.
Furthermore, if somehow the US, calling it that for simplicities sake, stays highly militarised and possibly a military dictatorship, as Zmflavius says its a drastically different nation and one that will not only start off far weaker but be far less likely to attract investment or immigration. Especially since relations of such a state with Britain are going to be far worse than OTL.
Also, given the relative disparity in resources between Britain and the 'US' even OTL before about 1870-80 the idea of annexing Canada is at the least verging on ASB unless you're speculating at least 1812 levels of distraction by Britain and once such distraction is over there will be questions about Canada.
Even assuming some other route to the 1914 start point of the main plot as others have said that huge army is ASB and would be impossible to maintain except possibly under the most extreme totalitarian state.
There might be possibilities for an American empire that goes very dark, like DoD, but I think it would have to start differently and follow another path. Say in the period after independence political and economic failures prompt conflict in the 1780's and ultimately some strongman takes over and you get the Roman type set-up for the US. Still rather unlikely and going to have a huge number of butterflies but far more likely than the POD taken here I think.
One other thing is that, regardless of the period of the main story is set I think the date of the POD dictates the category the story goes in. Thinking here of the example of the TL "Axis of the Andes" which was moved from post to pre 1900 by a moderator because while no real changes occur until ~1930 the original POD was a decision by a character in the 1890's. Hence I think the moderators would decide this TL, if resumed would go into the pre-1900 section.
Steve