IMO, The worst that will happen will be that people will accidentally send 10 BTC when they meant to send 10 mBTC and lose money...This could end up creating bad press for Bitcoin if too many people make this mistake. To prevent this from happening, all the clients must agree to make mBTC the default denomination at the time of transition. Anyone sending in BTC should get a popup window warning that they are about to send in BTC. Likewise, all the major exchanges must agree to switch at the same time.

I think the best time to switch to mBTC would be when a bitcoin is worth $1,000. So 1 mBTC would equal about $1. This would attract many new businesses to accept mBTC since everyone is familiar with the dollars purchasing power.