hi, an MRes is generally around 30:70 teaching to research, so 30% of the time will be lectures/tutorials etc and then the rest a research project. in my case, my grade was based on coursework from the taught part and then the majority of the marks from my project. it was weighted in a way that meant you had to complete all the coursework to get through the course and couldn't rely entirely on your project mark to get you through. i had no exams, only coursework/essays to hand in throughout the first part of the year, followed by the project.
as for using your final year undergrad work for the masters, the best thing to do would be to speak to the head of the masters course and discuss how much scope there is for devising your own project. at my university, they gave out a list of pre-determined supervisors/projects, and you could pick one. however, one person on my course did develop her own project based on undergrad work - she had to write her own research proposal and get the backing of a supervisor for the project, so it can be done. you need to find all this out from the people who run the course, as it differs from uni to uni, and from course to course.