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It stands for Milestone, and means that they feel it is a pretty stable build that now you can submit bug reports on as they work toward stable RC's. Installed it on my Droid 4 this morning and it seems okay, though I'm still having issues maintaining a solid data connection at times, usually when I fall out of service for a moment. Toggling airplane mode usually works, but would be nice if it didn't happen ;-) CyanogenMod 10.2 M1 Release | CyanogenMod
Well, you prolly just have to applications and clear defaults on the stock messaging app (or whatever other app you sms with currently) and then make a send sms to number shortcut somewhere so you can get the system to prompt you for what you want to open it with ;-) select hangouts and tell it not to ask again.
Hmm, well you are rooted, if you have the full version of Titanium Backup you could simply "Freeze" the stock Messaging app so it was disabled entirely and see if THEN the widget properly throws you to Hangouts...however, I'd have expected it to prompt you for what app should handle SMS once you cleared the defaults from the stock app. Especially since installing another SMS app did make the system ask you. I use Handcent SMS still and the old Talk app, but if I clear defaults or even update Handcent, the next time I click a "SMS to Contact" shortcut on my homescreen it asks what app to use the first time. Certainly try reinstalling Hangouts and also making sure it has handling of sms checked off too.