Now I have been trying to locate which international passenger transit hubs near Luxembourg are connected well with BOM and YUL
Given how far you are coming I would say any major hub in Europe would be within the range of reasonable to consider, personally I would say just put your trip into a planner tool and see what pops up.
I don't think the table of country distances you linked to is helpful, it doesn't say anywhere how it defines the "distance between countries" and many of those countries are much bigger than Luxembourg.
For transit points outside the Schengen area you would obviously need to check visa requirements.
You should probably avoid the UK as afaict (assuming you are Indian) you would need a transit visa to pass through there.
Also am I correct in my assessment/understanding that I need visa from any one of the these above countries to enter the others (90 day multiple entry visa).
For countries in the Schengen area the consulate you are supposed to get your visa from is determined as follows.
- The country that is the main (i.e. most important) destination of your trip.
- If there is no main destination then the country you will spend the most time in.
- If there is no main destination and no country in which you will spend the most time then the country you will enter through.
So if your main destination is Luxemburg then according to the rules you need to get your visa from Luxemburg. Regardless of where you enter the Schengen area and what other Schengen countries you transit through or make side trips to.
Once you have a visa it is formally valid for entering and remaining in all countries in the zone (unless it's a limited territorial validity visa but those are only issued in unusual circumstances).
However lying on a visa application is grounds to annul a visa. Presenting a false itinerary is lying. Remember that suspicion is generally enough for border guards to act, they do not need cast iron proof. Unfortunately some people do lie about their itineraries in order to "consulate shop". Therefore border guards can be suspicious about people entering on a visa issued by another country.
So when you present a visa (especially a single entry visa) at a port of entry in a country other than the one that issued it you should be ready to present evidence (e.g. transportation tickets, accommodation bookings, evidence related to the main purpose of your visit) that you do indeed intend to travel to the country that issued it and that it is either your main or longest duration stay.