BT are right on this.
if you "upgrade" you'll need a new contract. isn't fair really but thats the rule at the moment.
as you'll get put onto maxdsl the speed is variable and it'll sync as fast as your line can go. if you have 1mbit at present it should easily sync at 1mbit on maxdsl too, possibly faster. the 10 days monitoring is also correct.
what BT will do is put your number in the checker and see what it says. it may, at present, being showing 512kbit for your line which is why they told you may only get 512k. chances are the database is incorrect if you already have 1mbit on a fixed circuit.
as you appear to be currently out of contract you are free to migrate to another provider and take your chances there. i suspect if you rang BT and told them you wanted to migrate you'll soon see them firing discounts at you. in my opinion you should stay on 1mbit fixed if it works and hasn't given you any issue but still ring BT and say you might be leaving and see what they offer you