That is truly fascinating material - thanks agnelson! I have a number of friends who went from TN to GC, but only those without kids or spouses did this, and they always did it via consular processing. It does look like there are more opportunities to trip up going TN to GC via AOS, however. I suspect the decision of what route to take boils down to whether the position qualifies under H1B; if it does, getting an H1B before GC seems to eliminate a lot of potential hassles. I've cut and pasted the summary of the two options in the thread in case people are interested.
Option 1: TN to GC via AOS:
Pros:
1.1) By staying in TN status and avoiding H1b, you don't have to deal with any quota issues. Since TNs are always available, there is potentially less of a delay.
1.2) If you don't qualify for H1b then this is really the only way to go. I didn't qualify for H1b at the time my GC was getting processed, since I did not have a bachelors degree, nor did I have enough experience to make up for lack there of. TN was my only option.
1.3) By taking the AOS rout vs. the CP route, your spouse and children will get an EAD during the time that it takes to process the I-485. When you file CP your dependants will not have permission to work until they get their GC.
1.4) if your priority dates are current, you could take advantage of AC-21. CP does not qualify you for AC-21.
1.5) If your case is denied for any reason you could file an appeal or a motion to reopen.
Cons:
1.5) You should avoid travel if at all possible after your I-140 is filed.
1.6) You cannot travel whatsoever after your I-485 is filed, and before your AP is in your hand.
1.7) You need to ensure you have sufficient time left on your TN prior to filing your I-485.
1.

You will need to get an approved EAD prior to your TN expiring after you filed your I-485.
1.9) If your I-485 was to get denied, your EAD and AP would be void, and you would be out of status immediately.
1.10) You need to keep renewing your EAD and AP in a timely fashion to ensure you can continue to work and travel.
Option 3: H1b to GC via AOS:
Pros:
3.1) No concerns with crossing the border at any time during the process.
3.2) No need to file for EAD or AP, as long as you stay with the same company, you can keep extending your H1b.
Cons
3.3) You may need to wait for H1b's to be available.
3.4) If you switch companies (i.e. AC-21) or work for multiple companies when your I-485 has been filed then you would need to get an EAD and AP, in which case if your I-485 is denied for any reason your EAD and AP would be void, and you would be out of status immediately.
3.5) H1b's cost way more than TN's.