Hi Camparisoda,
This very much happened to me, actually - and I don't think it's all that uncommon.
In my case it became apparent that there was simply far too much to cover in my first chapter and that the argument I was constructing there was sufficiently detailed and significant for a PhD. This was about two years into a part-time PhD, so a little earlier than the point you're at.
However, if you've got sufficient material and feel confident that you can write it up as a thesis, I don't see that you'd necessarily have a problem making this switch. I'd definitely discuss with your supervisor though; they should be able to say whether the new plan for your thesis works as a PhD and advise on how much (if any) additional research is now required to expand the chapter material.
I'm sure others here will also share their own advice and experiences.
Mark