Gear, obviously you will do whatever you want to regardless of what anyone says in this thread. However, if you are so against getting an Osteopathic degree, then perhaps you should not (but why did you apply to begin with?). I say this because there are disadvantages to both you AND the osteopathic community for you to get a DO degree when you do not really want one.
The disadvantages to you as I see it:
I disagree somewhat with Kimberli Cox (Wow, did I really say that? Usually, K.C. blows me away with the strength of her advice...) somewhat on the DO vs. MD vs. IMG thing being primarily a premed issue. It comes up when you apply for residency, and it is harder for DOs to get into certain residencies at certain institutions (on the whole they do better than IMGs, though). (Please people, do not flame me for being honest. I am very pro-DO, but I am trying to present a balanced picture). Also, if you are interested in a research oriented career, then this too poses a problem since DO schools are not known as research academic powerhouses. Rather, they are more clinically oriented (if there is a research oriented DO institution out there, I am sure someone will let us know). I am not saying you could not overcome these obstacles -- many osteopathic students do just this, but they have to work harder than the average MD student.
The disadvantage for the osteopathic communities: They already have too many people asking about DO to MD transfers, exams to turn DO to MD degree, changing degree conferred to M.D.O., etc. They need people who will be enthusiastic and outstanding representatives of their profession -- and not people who are hankering for some other degree (who in fact would consider risking not becoming a physician at all than get a DO). It looks bad for their profession and diminishes their status.
Now, having said all that above, let me now do a 180 and tell you what a mistake I think it is to turn down a DO school in order to reapply to MD. Your grades are fine and so are you MCATs. It's possible you could go up a few points on an MCAT retake, but you could go down too (or stay the same) and then that would look really sucky. I am sure it didn't help that you applied in November, but I don't think it hurt you as much as you think, and the outcome if you had applied earlier might not have been that different. Everyone makes a big deal about applying early (and to some extent they have a point), but as long as you got your secondaries in by Jan, you should have been OK.
The 1 year masters degree is a waste of time -- you will spend a year spinning your wheels and I do not believe it will improve you chances significantly. In the meantime, you will be one year older (and that much more of an outlier as far as applicants go).
I am sure that out there in DO-Land, someone keeps track of who gets into what DO school. What if they blackball you the next year you apply to DO schools because you rejected them the first time?
If you really feel you cannot be content as an Osteopathic physician, then obviously you should turn them down (for their sake as much as yours). But if I were in your shoes, I would go to DO school and throw myself into it whole heartedly. I would find opportunities for research; if they are not present at my parent institution, then I would identify someone whose work interests me somewhere else and then do an externship/research elective there (which by the way is an excellent opportunity for you to audition for a residency position). If I were interested in highly competitive residencies, then I would make it my goal to kick butt on my board exams, work very hard during my externships, and get great letters from both allopathic and osteopathic attendings.
OK, sorry if I was a little rough. Just trying to give my unvarnished opinion.