Bearing Race replacement If have a Shimano FH-M475 rear hub, the cones are pitted and need replacement, the bearing cup on the drive side is pitted, probably still usable, but will never be great. The left side cup is still good. 

My question is can the drive side cup be replaced, is it part for the freewheel, or is the hub toast and do I need to use it as an excuse to upgrade to something a lot better? 

This is a bike that has only done around 1000km (all off road in mostly dry) conditions. The grease in the hubs was clean when I stripped the hubs. Any reason why the hubs (front one has trashed the cones, but not the bearing race, back one trashed the cones and on race) have failed so quickly? Could it be over tightened in the shop? I never checked the hubs, the wheels were on the bike when bought new from the shop, and have never been removed. There was no play in the wheels, so I never had reason to check the bearings.
You are lucky, bearing races (or cups, as said in the other answer) on Shimano hubs are not replaceable but you can replace the rear drive side by replacing the entire freehub body. It can be unscrewed from the hub with a 10mm hex wrench.

I am not sure if the freehub bodies are available as spare parts, but it isn't too expensive to get a new FH-475 and use it for parts. You should replace the balls and probably the cone on drive side, too.

In my experience, the low end Shimano hubs (no name, Acera, Alivio) don't wear well. Even though XT has similar construction and doesn't cost much more, the sealing and materials are better and the result is far more durable. On the down side, replacing entire hub requires rebuilding the wheel, which will probably cost more than a new wheel if you don't do it yourself.