I know there never was a canal filled with water on the site of what is now Canal Street, but was there ever supposed to be?
Yes. It was somebody's big idea as far back as 1807. By that year, New Orleans already was served by the Carondelet Canal, which connected Lake Pontchartrain and the French Quarter via Bayou St. John. Its turning basin was along what became known as Basin Street, near the site presently occupied by the Municipal Auditorium. Congress passed a law in 1807 that would have allowed extending the canal to the Mississippi River. The extension was never built, but its proposed route was made into Canal Street. It was just as well, because the Carondelet Canal (better known as the Old Basin Canal) was eventually closed, too.