The transfer rate from Membership Rewards to Starwood is 3:1. You wouldn't do this unless you were desperate. However, once the points are in your SPG account they are the same as any points earned through any other method. I do not know if award night count toward status.
It looks like it's now 2:1 (taken from the transfer partners page)
Starwood Preferred GuestŪ
1000 Membership Rewards points = 500 StarpointsŪ
I would probably do this with Hilton, assuming reward nights counted toward status.