N and M are both random values, from 0-5 (it says so in the additional notes >_<). It's like playing a chaos power on a 0/0 creature. The upgraded will never die because it is M+1 so its defense will be a random number from 1-6. That's a significant improvement in my opinion.
So yes, it is a lot like improved mutation is played every turn, but the card art stays the same.
Also, coming on to the field, it will also have a random attack, defense, and ability.