I found a few things on another forums that were the sticking pints that resulted in the Queen refusing the part time royal request. All of this is speculation.
1. The request to setup a separate office in North America - they would surely be needing a staff, it was unclear the autonomy of this office and its workings with the palace. There were adamant that there was no way to set up an independent body possibly creating a monarchy of Canada and USA.
Obviously
there is already a monarchy of Canada, which shares with the UK the same physical person (Queen Elizabeth II) as head of state, but is legally separate from the UK monarchy. The Queen's chief representative in Canada is the Governor General who, in the words of King George VI in his Letters Patent of 1947 constituting tthe office of Governor General of Canada is "
Commander-in-Chief in and over Canada" and is authorized and empowered "
with the advice of Our Privy Council for Canada or of any members thereof or individually, as the case requires, to exercise all powers and authorities lawfully belonging to Us in respect of Canada". In addition, each province of Canada has a Lieutenant Governor , appointed by the Governor General in Council under the Great Seal of Canada, to represent the Queen in the province and exercise her powers and prerogatives pertaining thereto.
Therefore, the risk was not Harry and Meghan setting up a "monarchy of Canada", but rather setting up a "parallel court" that has no basis in the constitution of Canada and would conflict or compete with the properly constitutionally empowered agents of the Canadian monarchy, such as the Governor General, the Lieutenant Governors, the Queen's Privy Council for Canada, and so on so forth. That is why a "separate office" or "household" for TRH The Duke and Duchess of Sussex formally set up in Canada and funded by the British government would be completely
unacceptable. It would have no grounding in the constitution of Canada and would be considered a violation of Canadian sovereignty unless it was deemed a UK diplomatic office, which it would be not, as it would be set up for different purposes.
A second contentious point is the use of titles inside Canada. As discussed in another forum, Canada has long held a position of opposing the awarding by the monarch of knighthoods, baronetcies or peerages to Canadian citizens. The historic origin of that policy was the fear that prime ministers of Canada could recommend such awards for personal political gain or,conversely, that such appointments could be made without proper consultation with the government of Canada undermining Canadian independence. Thus, Canada chose to exit the system of British and imperial honors (Canadian and British spelling 'honours') and set up its own system of national honors under the office of the Governor General with awards such as the Order of Canada for example.
As such, Canada has a Queen who, under the constitution, formally holds the Executive Power, is the Commander-in-Chief of the Armed Forces, and is part of the Canadian Parliament, and whose powers are exercised in Canada by the Governor General. But Canada does
not have a titled nobility or even a class of Knights. When members of the Royal Family visit, as they do often, they are accorded the treatment and dignity of Princes and recognized by their titles as successors to the Crown, but that is pretty much it. Having a resident Earl of xxx or Duke of xxx inside Canada conducting charitable work under that title as the Sussexes plan to do is problematic in the Canadian context as the editorial of The Globe and Mail quoted here on TRF discussed in great detail.
The USA of course is a different matter because, for starters, it is a republic under the US constitution and , whatever titles Harry and Meghan may hold, they have no legal standing in the US, nor Harry or Meghan have any power or authority under the United States or in any state of the Union.
