If your I-129 is approved and the approval notice I-797 comes with I-94 then you don't need to apply an H-1 visa overseas
http://blog.wenxuecity.com/blogview.php?date=200709&postID=27583
http://blog.wenxuecity.com/blogview.php?date=200709&postID=10310#list
I would transfer to H-4 to maintain status