I'm ignorant of the mechanics of these sales. My guess would be that Canada sells these Treasury bonds on the open market. A day later, some millions or billions of USD appears in their account somewhere.

Where is this account? What do they then do with all the US dollars? Do they put them in a USD money market fund? Do they buy Canadian bonds? Gold? Stocks? What happens next and what are the secondary effects?

Litterally the same as a person holding a bond - Canada rings their broker, they sell the bonds and the money (USD dollars in this case) goes into their account. They can then do with that what they want - buy Gold seems to be a popular one at the moment, sell the USD's and buy EUR's, buy European bonds with the EUR's etc ... whatever takes their fancy.

Word of a specific central bank selling lots would a) be widely talked about on wall street within a few hours and b) be reported to the Fed & the Whitehouse.