Usually in LOD systems you keep the two loaded in RAM the whole time and insta-switch the HQ model when you are close enough to see the detail. The assets do share most of the information, nowadays even texture as the lower res “mipmaps” are generated and stored with the texture file as well. This of course mainly goes for most sophisticated and efficient engines.
HDD “streaming” does not really go well with LOD in this environment as the setup is weighted around maxing the eye candy, gameplay and draw distance. You don’t want to load the lowdef file for the distant characters and only start loading the detailed mesh and fancy maps as the character comes closer because often the files are big and the model is close before it’s done loading the mesh. Because of the HDD access speed variation he programmers/designers also can’t count on which model each player has visible at each point of the game which makes designing some aspects of the game more challenging. All the relevant animations and texture and mesh details would need to be there in low res version as well.
Some games like WoW directly load some character models from the HDD and this affects the gameplay often. On the other hand they can’t expect anyones RAM to keep all of it stored because of the “massive” part in MMO. As far as I can tell Blizzard has been developing their LOD algorithms for as long as they’ve been developing WoW.
But even for very content heavy games the trend is moving towards smooth LOD stepping and storing models in RAM now that 64-bit OS brought support to >4gb RAM and people have been doubling and even quadrupling their RAMs. “Pop-in” mechanics are viewed as something low-brow if not downright “bugs”.