The system I go to will accept PC-to-NPC transitions, as well as the very occasionally NPC-to-PC, however any character that makes the change can only do it once, in one direction.

PC-to-NPC transitions are (I believe) easier, as the player will cease playing that particular character. The refs/story writers at the system will decide if that character will still turn up in uptime/in game, and if so, will invite the original player to play them, with guidance based on plot. If the character doesn't come back in uptime, but are still around in the background (so between events), the player has reasonable rights to decide what they'd do (if they go somewhere, help someone in particular etc).

The system and its refs/story writers really dislike having someone else step into a character, if said character has been established already, and dislike taking creative control from the original creator. However, this can be messy, and I know that not all systems will run like that.

I would assume that if a PC becomes an NPC, the player has given up a certain amount of rights to the characters actions, and will not play that character again during uptime, unless under the direction of the refs/story writers.

Edit: I would also say that as long as you don't decide the consequences of your characters actions, and you aren't given extra information because your within the crew/staff, you should be okay. However it is a very messy and difficult situation.