As far as I remember they never changed the faction change on MI on live, but I maybe wrong. In case they actually changed it, I am pretty sure it must have been as late as 2004-2006 as they actually did fix a lot of long time bugs/exploits in that timeframe wich had been untouched in game, some since release.
I am pretty sure tho, that MI did not just make you "Indiff" to everything. It moved you a set amount on the con list, so dependent on how high your faction was it changed you 1-2 levels towards better faction.
The usual use of MI was to eg. be able to buy enchanter spells in LFay.
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