H-1B Renewal

Hi All,

I am a Canadian citizen currently working in the US on an H-1B. H-1B expires on 9/30/2009, Canadian passport expires on 10/15/2009. I do not have plans to travel outside of the US anytime soon (recession!) and thus my plan is as follows:
1) Renew Canadian passport by mail
2) Company will apply to extend H-1B once I have recieved my new passport. Continue working in US past 9/30/2009 without leaving the country.

Two Questions:
1) Will my old passport get returned to me by Passport Canada, or should I remove the I-94 prior to mailing the renewal package?
2) Upon receipt of H-1B renewal docs (Form I-797?), will I be in compliance post 9/30/2009, or do I need to activate my new H-1B somehow (ie. return to port of entry?) prior to 9/30/2009?

Thanks in advance!!

1) Remove the I-94, this is the only bit of paperwork they care about once you're in the country;
2) No, provided they've applied properly listing your US address on the I-129 which they'd have to be pretty stupid not to do.