I cannot agree more with you and I was in the same situation as an international student. I did my undergrad in my home country and applied for PhD directly. Apart from the obvious benefit of funding, it will save me atleast one year. 4/5 years for direct PhD as compared to 2 + 3/4 = 5/6 yrs for PhD after MS.
However, for the original poster, if you just continue towards PhD at UW Madison, you won't waste that one year as you would be familiar with much of the stuff and can complete both MS and PhD within 5 years.