As far as I know the two things are different. At my uni, if you want to upgrade you need to submit a 10000 words essay and have an interview. If you decide to graduate of course you need to submit a dissertation and have a viva, which is not a walk in the park, you are right. As far as I am concerned I did my Masters part-time - because I had no previous experience of studying in the U.K and was scared - but it felt more like a full-time to me! This said, it was the right thing to do for me and I know other people who have done that. Of course you need to check with both your supervisor and Registry office what the options at your uni are, because there may be substantial differences.

I'm confused as well. I didnt do the upgrade thing, but where I am the MPhil requires registration for two years and a 65,000 word thesis (compared to 3 years/100,000 for the PhD). It's definitely not something you can just walk away with if you decide you dont want to carry on after a year. And in my subject area very few people actually have data after one year, so you'd need to go on to actually produce some to write up to get the MPhil.

You are right, the MPhil registration is for two years. At the end of year 1 you can choose to produce a piece of 'original research' - as I said at my Uni is 10000 words - and sustain an interview. If you do not upgrade you go on to do your 2nd year at the end of which you submit a dissertation - length requirements may vary, at my uni is 70000 words including footnotes. Then you have a viva.
I didn't do the upgrading personally, so I am not aware if after year 1 you can decide to upgrade by your own initiative or carry on to do the 2nd year and write the dissertation. I think you usually agree this with your supervisor well beforehand and schedule your work accordingly. I am not aware of anyone who has decided either ways at the last minute.

uh, one of my collegue is going to quit PhD and just finish with Mphil though. He got a good job, and I think he is doing the best for this year even though he didn't like the project.

in aberdeen university, after 9 months we have to submit a kind of mini-dissertation..have a oral presentation and viva. then the graduate school committee will decide either we can persue to second year of PhD or, terminated and get MPhil. usually everybody will pass, of course with a lots of hard work!