If they don't leave, yes. But if they leave and return, they will get a new I-94 which will be limited to passport expiry.If your I-94 was issued by USCIS via I-129, rather than by CBP at the border, your I-94 may exceed expiry of your passport. You can this remain in US until that date, regardless of passport expiry.
No it doesn't. The default rule is that nonimmigrants' period of admission must end 6 months before passport expiry. Canadians (and people from other countries on the 6-month club) get 6 months more than that -- their period of admission must end at passport expiry. (Basically, their passports are considered to be valid until 6 months after expiry, so 6 months before 6 months after expiry equals expiry itself.)The link sent by newacct confirms that a Cdn can indeed remain in US past passport expiry, for six months.