I've never heard of it (which doesn't mean it's never happened, mind you). I have heard of someone who started D.O., finished a year, and wanted the M.D. so badly they reapplied and started over as an M1 in the Caribbean. Not an easy, desirable, or financially sound path.
I agree with the above poster; if you simply won't be happy with anything but an M.D., do what you have to to improve your application and reapply until you get in. The D.O. route is not for people who are "settling" for it. Good luck.