The mystery of "Canadian Content" rules

As most of you have probably figured out by now, I'm not much of a fan of the Canadian government's meddling in the entertainment and broadcast industries. Their weird and whacky "Canadian Content" rules are just part of the distorting influence of the feds in this area. I didn't realize just how odd those rules can be, until I read an email from Mike Major to the Canadian Browncoats mailing list, talking about a new SF venture:

[. . .] a local group of producers and actors are doing a hard SF serial distributed through the 'net which, while not in the [Firefly/Serenity] 'verse is certainly evocative of a similar kind of feel.

http://www.rebelspace.com

Thought there might be some interest in Canadian home-grown, produced, acted, directed and everything else hard SF. Oh — they can't get funding from the government because it's not set in Canada.

While I don't think the government should be providing any funding to anyone in the entertainment business, if they must do so, they should at least be reasonable in how they choose who gets funding. So a group of Canadian actors, with a Canadian crew, using a Canadian script, and Canadian producer/director isn't enough to qualify the production as "Canadian" enough . . . because it's not set in Canada?

Someone want to parse that one for me? Because they certainly hand out lots of money to plenty of productions that are shot in Canada using foreign actors, directors, producers, etc. Is the "set in Canada" the most important criterion?