There are programmes which require students to first register for an MSc and progress directly to a PhD based on good first year performance. But if students fail to complete the PhD, would they be awarded MSc?

They would need to complete and pass whatever examination is required for the Masters degree, this would usually include a thesis or dissertation and viva. Ordinarily if the student decides not to transfer to the PhD (or the department decides they're not good enough), then they would be entered for the Masters qualification.

Does this apply to students who have registered directly for PhD (instead of having registered for MSc first)? In other words, can they switch to MSc?

We've no heard of people switching to an MSc, but switching to an MPhil is possible with the support of your supervisor and grant awarding body.