I think I read on the WoW forums that the guest key would be upgradeable to retail if the monthly payment is made. I might be wrong though.
What Charl said. I was watching this issue closely (even got me to post on the beta boards a few times). We were all hoping the buddy pass would be upgradeable simply by paying the subscription fee, but no dice.
Too bad really as the math showed there was only a fairly slight advantage to buying the CE and upgrading the buddy pass (assuming it only required a subscription) versus buying two regular editions.