I was working on an H1B in the U.S. and left in 2006 and became a Canadian permanent resident. In 2008 I made an early distribution of the IRA I had established while in the U.S.

Do I have to file a 1040NR in the U.S. and am I therefore taxable in the U.S.

I incurred significant tax losses in Canada in 2008, so ideally I would like to have this IRA distribution taxable as ordinary income in Canada and therefore offset against these losses.

The distribution IS taxed as ordinary income, but that income is the ONLY income subject to U.S. taxes, and thus the losses from your Canadian base CANNOT be used to offset the U.S. income.

Additionally, there will be a 10% Early Withdrawal Penalty which CANNOT be mitigated by any loss or deduction.