I think you are trying to do two things at once, which makes it difficult for your toddler to understand.
1) Switch from bottle to sippy/cup
2) Switch from formula to milk
You have to realize that what you are doing is taking away the primary source of comfort that your baby has had for so long. Formula = food = comfort = in bottle.
My suggestion would be to change one thing at a time and give the child time to adjust to one change before piling on another. If he likes his milk to be warmed up a little (mimics breastmilk actually) then do it, in the bottle for a while. Once he is used to new taste of whole milk vs. formula then work on switching the containers.
When I was partially weaning my son from the breast to whole milk, I would sometimes give it an interesting flavor (molasses + milk) or the littlest bit of honey and milk. I also gave him yummy whole milk yogurt and applesauce to supplement some of the breast milk feedings. That satisfied the hunger issue and was just interestingly flavored that he would let it go.
We got him to drink out of a cup by offering sips to him even at an early age. As he got older, we were given the most wonderful cup with 2 handles and he really liked being able to control it himself. Of course, you ahve to be ready for them to make a few spills along the way.