No to expansion, yes to relocation. MLB talent is already spread thin at 30 teams.
Montreal would probably be fine as long as they got an acceptable stadium and had intelligent people running the team (i.e. can do a reasonable job of developing their own player). Fan support was non-existent leading up to the move to DC but starting in 1994 that team and that fanbase got dicked over so many times, in pretty ridiculous ways, that I can't blame them too much for throwing their arms up and letting go by 2004.
Mexico City would be ballsy. Economically I think it can work. The Mexico City region has 20 million people, granted a good number of them live in squalor by U.S. standards. Still, it's a hugely important financial center, the rich are very rich, and surely you could whittle that total of 20 million down to a smaller but more workable number. Let's say we just cut out the bottom 80% (in terms of wealth) of the population for argument purposes. They don't exist. That would leave a population base of 4 million. Insert that into the list of U.S. combined statistical areas (insert Toronto as well), and Mexico City would be the 15th largest market - ahead of Minneapolis, Cleveland, Denver, Pittsburgh, and St. Louis among other current MLB cities. If you cull the workable population down to 3 million, then it's 20th, still ahead of St. Louis and Pittsburgh.
Logistically, it's a bit tougher. The closest city is Houston, which is just under 1,000 miles away - about the same as Boston to Chicago. Some sort of southern division with Mexico City, Houston, the Rangers, Miami, and Atlanta (or Tampa if the Rays stay put) would probably be the only halfway-decent alignment, but that would mean blowing up the current alignment. And having an exclusively southern division in a game where most of the major markets on the east and west coasts could make things tricky everywhere else. Mexico City also cannot be in the same division as Seattle, Oakland, or San Francisco - in terms of travel that's on the level of putting those teams in the same division as the Red Sox.
Also, security. I've never been there so I don't know credible all the safety concerns are. The fact that concerns even exist though would probably be a major deterrent for players and officials.