I currently have a paid app in the store. Apple have not allowed a \'lite\' version to be submitted as well, so I have no choice but to update the current paid version to a
First, I just want to say I personally think the freemium model is great. It has worked out very well for many developers. People love to download free apps, and will do it on a whim, but pay much more attention to an app before spending $0.99 (Which is due to the effect of free - for more info on that, check out Dan Ariely's book Predictably Irrational)
For more info on freemium, google it - There have been tons of articles written about the success of it.
Ok, back to the actual question:
Theres a couple ways you can handle a situtation like this, although the unfortunate matter here is none of them are fool proof.
Another, not nearly as fool proof solution (but much quicker/easier to implement) is to use NSUserDefaults. You can store an object when the user makes a purchase, or with the date a user installs your app. Then if you issue an update converting your app to freemium. Then in the new update, check which purchases the user has made or the date they installed it, and react accordingly. For info on how to do that with NSUserDefaults, check out my answer to another question on implementing that: NSUserDefaults and app versions.
But this solution does present the following pitfalls:
If the user deletes your app, the NSUserDefaults are lost forever
In summery, this is a difficult question, with not a lot of easy/perfect options.
Anyway,
Hope that helped!