Osmond, a 16-year-old from Sherwood Park, Alta., won the women's short program at the Canadian figure skating championships. She landed the only triple-triple combination in the field to set up what should be a battle between the veteran and newcomer in Saturday's long program.
The 24-year-old Phaneuf, the defending champion who's competing for the first time since a move and coaching change in November, finished well back in fourth.
Osmond scored 56.94 points for her Bollywood-themed program to the soundtrack from "Bombay Dreams," earning high marks for her triple toe-triple toe. It marked the first time she'd landed the jump combination in competition, and only the second time she'd attempted it.
"I wasn't really expecting anything," said Osmond, a Grade 11 student. "I just wanted to go out there and skate the way I have in practice. I just got lucky."
Amelie Lacoste of Delson, Que., was second with 52.43, while Alexandra Najarro of Richmond Hill, Ont., was third with 52.34.
Olympic ice dance champions Tessa Virtue and Scott Moir had a shaky short dance to hold a narrow lead over Kaitlyn Weaver and Andrew Poje. Piper Gilles and Paul Poirier are third.
"What we've heard all week is, 'Oh you'll be fine, it's just nationals for you,' but we find the nationals brings a lot of pressure, you're in your own country, you want to perform well for your fans," Moir said.
"I definitely felt that pressure tonight and really wanted to go out and do it and maybe it was a case of squeezing the stick too tightly... There's a hockey term for you," he added laughing.
Meagan Duhamel and Eric Radford lead after the pairs short program. Jessica Dube and Sebastien Wolfe are second while defending champions Kirsten Moore-Towers and Dylan Moscovitch are third.
Phaneuf has been struggling to rediscover the form that propelled her to a fifth-place finish at the 2010 world championships, and finally decided a drastic change was in order. She left her longtime coaches Annie Barabe and Sophie Richard and moved to Toronto to train with Brian Orser in November.
The native of Contrecoeur, Que., had a shaky skate, falling on a triple loop and touching both hands down on her triple Lutz.
"I was very nervous before going out there," Phaneuf said. "I did mistakes. If I think about all the changes that have been going on in my life lately, that was not the best skate, but the competition is not over.
"It was the first competition with my new coach. I have to deal with it and I'm happy I (made the change) anyway. I'm just looking forward to the future."
Orser, a two-time Olympic silver medallist, said making such a momentous move mid-season isn't easy. But he has already seen signs of improvement in Phaneuf's skating and overall fitness.
But he added, his new pupil is carrying considerable expectations and pressure in these championships, especially with a berth in the world championships on the line.
"I know she was feeling a lot of pressure here, as she should. It's a big competition," Orser said. "She's reigning Canadian champion, there's only one spot (in women's singles) for the world championships, she's made a big change in her life, moving to Toronto and moving away from her longtime coach, change in environment, change of training location and change in training habits, so I think she feels people are expecting to see a big difference."
Orser pointed out they've only had six weeks to work together.
"And from the beginning, this has been a longterm project for both of us," he said. "You can't make big, big changes in six weeks."
Phaneuf won the Canadian championship in 2004 before Joannie Rochette came along and won the next five. She was back on top of the podium last year, but her international results have dropped off — seventh- and ninth-place finishes on the Grand Prix circuit.
"I was looking towards the big picture for the Olympics," she said. "But it takes time and effort and difficult moments like that (short program), but I just have to go through it, and I'm sure it's going to pay off.''
Phaneuf is Orser's first major Canadian skater. The former Canadian star, who turned 50 last month, coaches numerous international skaters out of the Toronto Cricket, Skating and Curling Club. Included are Spain's Javier Fernandez and American Adam Rippon and he coached Kim Yu-na of South Korea to Olympic gold in Vancouver before she fired him a few months later in a well-publicized split.
"It's exciting, I have great memories from all my Canadian championships," said Orser, who won his fifth Canadian title in 1985 in Moncton. "I'm proud of her, I'm proud to be with a great Canadian skater."
Friday's results set up what should be a dramatic women's long program, considering Canada can send just one women's singles skater to the world championships in March in Nice, France.
Skate Canada high performance director Mike Slipchuk said, should Osmond win the Canadian title, she would compete at worlds if she and her coach Ravia Walia felt she was ready. When Phaneuf won the Canadian crown in 2004, she did not compete at the world championships.
Regardless, the young skater's strong performance Friday was welcome news for a women's field lacking an international star since Rochette stepped away from the competitive ice after the 2010 Olympics.
"It's good to see our younger skaters like Kaetlyn come in here do what she can do," Slipchuk said. "From what we say today, she definitely has a lot more she can give.
"We need to have these kind of performances where we have younger people step up and challenge the top. We've been missing that for a while, so this will nothing but good for our ladies event."
Virtue and Moir revamped their program based on feedback after their silver-medal performance at the Grand Prix Final last month, but Virtue had a stumble, touching her hand down and the two were out of synch at times, finishing with 68.41 points.
"We're testing it out, we're feeling it and seeing how we feel competing with the changes, and getting some feedback from judges," Virtue said. "We're anxious to prove ourselves, and to prove that the changes we made were good, but we have to know that they are and trust our process and go out there and have a fresh start (Saturday) with a program that we love."
Weaver and Poje scored 68.41, while Gilles and Poirier finished with 62.78.
The pairs is wide open after Friday's short program that saw less than a point separate the top three teams. Duhamel, from Lively, Ont., and Radford, from Balmertown, Ont., scored 60.92 to take the lead into Saturday's long program. Dube, from St-Cyrille-de-Wendover, Que., and Wolfe, from Terrebonne, Que., scored 60.65 to sit second.
Moore-Towers, from St. Catharines, Ont., and Moscovitch, from Waterloo, Ont., are third with 60.26.