In order to reconnect continuity of ownership you need to get a signed affidavit from a legal notary. Your local town government will have a notary on hand that can sign, stamp and date your declaration of ownership (they'll offer this as a service). I stopped in at the Centre Wellington Town Offices in Elora and explained the situation (clueless kid was previous owner, etc). I showed them the ownership history the MTO had printed out for me (all six pages of it!), and the letter of sale from the previous owner. I also said I'd made repeated attempts to find the last legal owner (I suspect he's deceased).
The county clerk (who is a notary) signed, dated and stamped the affidavit I provided (that's it above), and I took it back to the MTO office the next day. In just a couple of minutes I paid the taxes on the sale price and the bike was attached to my name and a new ownership was printed out. They keep all the relevant paperwork, including the affidavit.
It's a bit of a pain in the neck to reestablish ownership, but it's not particularly expensive (twenty bucks to get it signed) and just takes a bit of leg work by the new owner. I'd argue a hundred bucks off the price for your time and costs to get the bike sorted - more if the previous owner is a tool (which they probably are if they lost all their paperwork).
