Philosophy PhD vs. MA?

[eep]

So, while I wait for the rest of my rejection letters to roll in, I am faced with the following choice: I have been offered full funding for the Ph.D. philosophy program at a not-particularly-prestigious school to which I applied basically as a backup plan. Other pros of this place (henceforth School 1) include that it's a small department (i.e. lots of attention) that is highly specialized in almost exactly my area of interest.

School 2, predictably, is a much more prestigious place with a lot of famous people working there, a good fit for me academically, and put me on the waitlist with an acceptance to their M.A. program. The M.A. option would offer only token funding (like, 4 or 10 credits paid for over the course of the program), and I promised myself I wouldn't do the M.A. thing because I don't want to go into debt to be treated like second string. But, all other things being equal, I would rather go to School 2.

So what do I do? Could I sign up for the M.A. for a year and then reapply for School 2's Ph.D. from within next year? Is that frowned upon? Am I being silly to even consider turning down the only offer of full funding that I got? Will I even be able to get a job if I go to School 1? (They have not a terrible placement record, but not a good one either.)

Any advice would be fantastic.