Will my current local bank's merchant account let me set up online or will I have to go through someone else?
I'm in Canada. My biggest concern is I have a lot of payouts that will be needed to be made each month, and I don't want to have a hard time dealing with funds and transfers.

If you want a reliable and helpful payment processor for that business then you should try CCBILL.

The have a affiliate system and they will pay them too also they can handle password management for a member area and do recurring billing.

yeah, I'm in Canada though. My partner is now in the US and waiting for his SIN.

Banks do not care whether you sell softcore, hardcore, or elephant sex videos. For them it's all high-risk area which is subject to adequate registration of you as "high-risk" merchant. However, talk to Moneris Canada, they may be able to assist you with such merchant account. (Make sure your deposit bank is aware about nature of your business though).

Thanks, it was Moneris I deal with, I just didn't think they would take it.

Well Moneris said they won't do anything like that.
Anyone have any guidance for me?

You could try with MultiCards or CCBill.

I don't think CCBILL takes Canadians. Or they only take MC and not visa, or vice versa.

Tried netbilling and two other big ones. Netbilling said we have to do $50k/month. Other two have not got back to me.

Sounds reliable!!!!