Suggestions for progressive upgradation of bike I have one bike, which is pretty cheap. It's a Mid-Level Mountain Bike of Motache (I tried to find a picture but, no luck). But, now I want to upgrade this bike progressively and change it into High Level Bike (or somewhere near) pduring course of time. 

For doing this, my policy is if something breaks down, replace it with high level parts. I am not sure if this is how I am suppose to do it. Like for my recent upgrade when my rear derailleur broke, I replaced with Shimano XTR which is pretty neat. But, it is going to take a long time to upgrade i think. So I want to upgrade something now.

Now my bike contains V Brake, has lowest grade of fork suspension ( I think, its terrible ). 7*3 Speed Gears, normal shimano crank set and etc. (you can guess the remaining.) 

Now, from the passionate and experts cyclist, I would like to know what should be first my upgrade and so on. One of mechanics and also my buddy told me upgrade my suspension first. I use my bike for daily road riding, and occasional off roads trips in holidays.
I tried the same approach that you're outlining with a bike I bought (a Shogun), but I had heaps of trouble trying to upgrade components. Every time I upgraded one component it wouldn't work well with the other existing components. I tried to change the cassette but it wouldn't work with my derailleur (even my mechanic couldn't figure out why).

The other problem with upgrading is that each component bought individually will be vastly more expensive than buying a bike with better components in the first place.

So my advice is to live with your bike unchanged as long as you can, saving the money you would be spending on components and then buy a new/second hand better quality bike.