Yeah most of my friends seem to be on Fido or Rogers. They also just take their own phones with them from here, so they don't have to deal with the contract phones, etc.

Yeah, there are activation costs, but they are somewhat absorbed because they give you bonus minutes upon activation. I use prepaid because I'm a light user and it is cheaper for me than a monthly plan. It depends on your usage. They also have City Fido for heavy users. $40 a month includes unlimited text and plenty of airtime.
It never hurts to shop around, but I wouldn't even bother with Bell. Their network is inferior [they use CDMA, not GSM with SIM cards], which also affects your handset choices, their prices don't seem competitive, and they started charging my friend for incoming texts. Who does that!?

Virgin Mobile runs off the Bell network (and is now owned 100% by Bell btw) which is CDMA.

If you already have an unlocked phone (depending on the model, GSM in Canada is 850/1900) you can just bring it here and get a SIM from Rogers or FIDO. You don't need to commit to a contract, and can go month by month. It is only if you get a phone from them, and they subsidize the cost of the phone for you, that you need to sign a contract.

If you are a very light user and want prepaid but not the hassle of losing minutes every month then look into Ztar mobile (Found at 7/11) or Petro Canada mobile (http://mobility.petro-canada.ca) which I believe are both based on a yearly model rather than monthly. Both run off the Rogers GSM network.