Reactors using unenriched uranium can be more fuel-efficient in terms of electrical output per ton of natural uranium consumed, but they're not more cost-efficient. High project cost is the number one problem that impedes nuclear construction while fuel cost is almost negligible. Keep in mind that Canada's newest CANDU, Darlington 4, started construction in 1986; if you're comparing its costs to a light water reactor then you should also use mid-1980s costs for those and not e.g. the high costs for more recent EPR or AP1000 reactors. Building a new CANDU in Canada today would also cost more than it did in the 1980s.
However I'd argue that in terms of total lifespan costs the increased waste production of LWRs is considerable portion of perceived costs - essentially the long-term storage fears vs burn down in fast reactors etc. Plus the focus on LWRs ensured that research in more capable designs was stiffled.
Do not take this "rah rah nuclear best renewables suck" though. Though I'd be very interested in how costs would go if we taxed/penalized emissions do the max - essentially, I consider every new fossil fuel plant, including gas backup for renewables, to be a policy failure. My personal dream is overprovisioning with nuclear and renewables and instead of curtailment try to funnel extra power into other, previously uneconomical things (replacement of coal in smelting with actual green hydrogen, stuff like that)
I agree with you that it would have been (still would be) better to have emissions taxes penalizing pollution from fossil fuels instead of technology-specific incentives and subsidies for the various kinds of fossil alternatives. I live near a nuclear power plant and I have no problem with its track record of safety or emissions. I do think nuclear power has a major cost and scheduling problem for new projects and I'm not sure how that can be overcome. SMR projects like this one that Utah just canceled were the latest great hope for taming those issues.
Light water moderated reactors aren't a pathway to making nuclear weapons, because they require that you have the ability to enrich uranium separately just to start.
I.e. a light-water moderated reactor is dependant either on capability to enrich fuel and/or use unenriched fuel (for enrichment or plutonium production) - which are core capabilities for making fission weapons.
This is why they have been favoured on non-proliferation (and often "control") grounds - they are dependant on fuel from groups that do have fission weapon production pipeline or at least parts of it.
To work from natural uranium, without artificial enrichment, you need to use either heavy-water moderation or graphite moderation, or more exotic designs - but then you can both use unenriched uranium to produce power as well as produce plutonium or other useful things, and a distillation pipeline provides for both light-water reactor fuel and weapon fissile material.
Details of how subsidies went are way more complex, and both renewables and nuclear and fossil fuels had areas heavily subsidized.