When I did my PhD, I always thought that the transition from PhD to MD would be difficult because of my lack of knowledge about medicine, as I had forgotten a tremendous amount during my time in lab. That was true, but it wasn't the reason that the transition was hard.
The transition was hard because the culture and process of the PhD is so dramatically different than the lab. As you transition from M2 to PhD, you will find that there also is a culture shock. You almost certainly will not know what is going on, you will spend a lot of time confused, failing, and struggling. Most good labs understand this and help you through it.
The transition from PhD to M3 is similar. You still are confused, failing, and struggling because you do not understand the process of the service your on, the hierarchies, basic protocols (e.g. where echocardiograms are in the system, which fax machines don't work), or even your role on the team. But unlike the lab, your rotation is anywhere from 2 - 4 weeks, so you're being judged for your performance in a very narrow timeframe. And of course, it's not entirely clear what you're supposed to do, as most M3s are extraneous to the team. It's like rotating through a new lab every 2 weeks and being expected to be self directed and entirely functional. On top of that, you're being judged against your peers who have been doing this for several months more than you and are more savvy.
If I had to do it again, find yourself a few mentors who are M3s or M4s and shadow them on a regular basis. Actually making this happen is very difficult.