Ok, I've been through this 6 times myself (most kids were all out of thier cribs around a year) and here is my advice.
1)Skip the "in between beds" there's no sense in spending all that money on something they won't want to have anything to do with in a year or two anyway.
2)Do put a twin top mattress on the ground for your little one.(Against a wall is best, but not necessary) Make a big deal out of the "big boy bed". Use this bed for a week or two, or until your child seems to have pretty much stopped "falling" off all the time.
3)Put the boxspring under the top matress for another week or two. Your child will probably still fall out ocassionally, but it's not too far so they won't be hurt, just make sure the side of the bed is toy-free :) But this will help their body re-enforce to them where the sides of the bed are. Tell your little one they're doing such a good job with their new bed that it's becoming an even bigger boys bed! And that if they do good with this one, their bed will get even bigger!
4)Put up the twin frame. Install side rails if you think your child may need them (or they make you comfortable) and place a non-slip stool by the bed if needed.
Children will adjust to the bed just fine at that age. I suspect the problem the other mom's friend had with her children is that she moved big girl out and new baby into the crib in too small a timeframe. Make sure there is a week or two in between (if you can) Either way, make a big deal out of how "baby" the crib is, and how "big" thier bed is. Leave the sheets off of the crib for a bit if you can (so it seems empty and uninviting) and when you're ready, re-make the crib with totally different sheets,etc. (at least for the "waiting for baby period" So it doesn't seem so "familiar" to the older child. Have them help you get the crib "ready for the new baby" too. You can also move the crib out of it's familiar location (and maybe the big bed into it) if you feel it would be helpful.
Good luck with the transitioning, and don't worry too much, it will work out fine! :)