The team with the top 5 player on their team usually wins in the playoffs. The Raptors won last year because Kawhi was a top 3 player in the league (with a case for best in the league). The only team in the East with a top 5 player is Milwaukee, so I can't see the Raptors having a real chance against them. Competitive? Sure, but that series is over in 5, or 6 at best games. With that said, get to the ECF and go 5-6 games with the Bucks after losing 40% of a finals starting lineup and replacing them with undrafted players and RHJ? I'll take it. That would be a sweet victory lap.
As far as seeding, yeah the Raptors need the #2 seed. It not only puts them in position to avoid the Bucks until the ECF and get an easier first round opponent (although a healthy Kyrie would be dangerous if it ends up being the Nets at 7), but also gives them home court against similar teams like the Heat and Celtics. HCA matters when it is teams with similar talent, and the Raptors have the championship experience edge on top of that.
Get the #2 seed and let the chips fall from there.