Yeah, good question.
Basically, since I'm at the two year mark, I have the option of "stopping" at the MA. So when I applied to schools, I described myself as expecting to recieve an MA this May.
Since all of my recommenders are current professors of mine, yes, a few know that I am applying out. Although I'm not widely broadcasting this fact to the rest of my department, I've only received encouragement from those who know. I think a lot of this hinges on the fact of two reasons though:
1) The fact that a big reason for my applying is due to my partner's move away from Philly.
2) The professor I originially came to work with moved unexpectedly, so they also understand that my field of interest is less supported currently.
I am also curious about how transferring works after one has gone past the "MA" point of study. Can people transfer out once they've finished coursework in their current program? I'd be interested to know this as well, in case I decide to reapply next year if Maryland doesn't work out. Right now I don't see any reason why I would, but it would be nice to have the option.