Ok, Circuit for your 2 questions this is what i think.
By upgrading from WP to WPMU it is possible to have all your data back up to 95%. It worked for me except for the users because of the fact that by default WPMU do not accept Uppercase or special characters in the login field.
If you can find a plugin that can fix the login problem in WPMU it may take care of the problem. Otherwise you will have to tell your users to sign up freshly and everything else will be back to normal.
Far as the procedure of moving your database from WP to WPMU:
1) Export your full WP database and save it to your desktop as a .sql file.
2) Create a new database in which you will install WPMU.
3) After installing WordPress mu, create your first blog.
The default WPMU installation should give you these tables:
wp_1_categories
wp_1_comments
wp_1_link2cat
wp_1_links
wp_1_postmeta
wp_1_posts
* the number 1 will change to 2 as the prefix table of your second blog ex: wp_2_categories etc...
In addition to the tables listed above you will have other tables with only wp_ as prefix, and they should be by default:
wp_blogs
wp_blog_versions
wp_registration_log
wp_signups
wp_site
wp_sitecategories
wp_sitemeta
wp_usermeta
wp_users
* These table are shared by all additional blogs that you will create.
Go to the exported database in you desktop and edit the database tables of the old blog that was using WP by simply rewriting the prefix tables from wp_ to wp_1_ so they can match with the first WPMU blog's tables. You should also remove the other tables with prefix as wp_ so you can have a .sql file with only wp_1_... type of tables.
Then come to phpMyAdmin and deleted the tables of the WPMU's first blog, but only tables that are in the form of wp_1_ .
After that import your backed up database to replace it with the one deleted.
One last step, replace you upload folder inside wp-content folder of WPMU with the one you had from WP ( to have all you files back, you ca use FileZilla or any other FTP sofware to import your file from the server ).
That's it!
This articles will help you with the database moving procedure and WPMU installation
http://www.bloganything.net/775/how-to-move-your-wordpress-blog-to-a-new-web-hosting
http://fragments.turtlemeat.com/mysql-database-backup-restore-phpmyadmin.php
Good Luck!