Firstly, it is far from clear that choosing to use Canadian English in your paper actually commits you to changing non-Canadian spellings in quotations to Canadian spellings. A spell checker merely provides suggestions for you to consider. The idea that because a spell-checker highlighted the word it needs to be changed is false. The rest of the answer addresses the case where you have some other compelling reason to change spellings in quotations beyond the fact that it was suggested to you by a spell-checker.
The situation seems largely analogous to what you would do if the original quotation were, say, "foun in the neighborhood". You would presumably quote that as "foun[d] in the neighborhood", and no sane person would think of this as being a translation. Similarly, what you are in effect saying is that the spelling "neighborhood" is incorrect for the purposes of your paper. So the solution "found in the neighbo[u]rhood" seems to be the appropriate one if you insist on changing the spelling.
The question of why translations are handled differently than direct quotations is considered here:
You may wonder why your translation is considered a paraphrase rather than a direct quotation. That’s because translation is both an art and a science—languages do not have perfect correspondences where every word and phrase matches up with a foreign equivalent, though of course some cases come closer than others. Even in the example passage above I considered how to translate “Les femmes dans des activités masculines”—taken word for word I might have written “Women in masculine activities,” but I thought “Women working in masculine fields” better conveyed the actual meaning, which relates to women working in male-dominated occupations.
Clearly this reasoning does not apply to trivial changes in spelling. Nonetheless, you should make it clear to the reader that you have in fact changed the spelling of the original quote.
