This isn't the correct explanation for several reasons. First is that when an oxidizer oxidizes Combined Chlorine (CC) it does NOT generally create Free Chlorine (FC). For example, when chlorine oxidizes monochloramine it ultimately produces chloride salt, not hypochlorous acid. Second is that MPS does not effectively oxidize monochloramine.
This paper shows in Table 3 (unfortunately you have to buy the paper) that 200 ppm MPS (in units of Oxone, the triple salt) without a cobalt catalyst results in only 1-3% oxidation of ammonium ion in 4 hours. Likewise, creatinine was not oxidized by MPS without a cobalt catalyst.
Instead what happens when you test water that has MPS in it is that MPS generally registers as CC in a DPD test but in a FAS-DPD test it will register as FC if there is any chlorine present. The reason is that while the MPS at normal dosages doesn't generally react much with DPD directly, it does get reduced by the FAS drops so when you add those in measuring FC you will end up measuring (counting) the MPS as well. HOWEVER, if one adds concentrated MPS to a small test vial, the HUGE amount of MPS will directly react with DPD and be seen as FC. That is, the MPS interference does affect FC if the MPS is in a high enough concentration. This is discussed in the paper I linked to above. So there wasn't a conversion of CC to FC, but rather the MPS at high concentration was directly interfering with the test by measruing as FC.