Thinking about switching to a Masters from a PhD, advisor wants a decision now Main Question:

Three semesters into a PhD program, I am still unhappy with my project. I am currently in a summer internship where I was offered a job, and as I have enjoyed it so far and they pay well, I am considering finishing a Masters degree and leaving after that.  I emailed my advisor to let him know about the offer, asking his advice about that and about the logistics of switching tracks.  He has now asked me to let him know what I decide so he can give my TA position this coming semester to a different student (only PhD students at my university are guaranteed funding).  I don't want to be misleading and take funding away from students who are committed to a PhD, but I honestly don't know what I want to do yet.  I wonder if there might still be a chance that everything gets better and I do finish a PhD.  But since I am not committed, is it better to officially switch?  I don't know if it is possible to switch back, because my grades have not been the best and my university is very selective.  (But I worry that the department does not look highly upon me at this point anyways - my first year was rough, and I ended up taking leave last fall for personal/health reasons.)

How should I handle this situation?

Possibly relevant background information:

almost 23, US, computer science.  Finishing the requirements for a masters degree will take 2-3 more semesters (five classes and a paper).  I majored in physics in undergrad but added a computer science major my junior year, and then decided to apply to graduate school for that because there were many things I hadn't gotten to learn about yet and found interesting.  So I am now in a highly ranked program doing a project related to AI / NLP, which I had very little experience with prior to grad school.  The project is old, in a language I hate and struggle with, has mostly been bug fixes and reimplementing things that have already been done before.  With the exception of last semester, when another student joined (she has left already) it was just me working on it and three professors giving out tasks.  Entering my third year, I am starting to feel pressure to figure out a topic, but I still feel as if I don't know enough to decide and have no clue what would be acceptable or even what I would want to do.

I miss the excitement of undergrad days when I would write simple AIs or algorithms for my own amusement and edification - I thought grad school would be like that, but I haven't done anything of the sort since.  I've enjoyed my industry internships and class projects far more than any 'research' tasks because I got to build something that actually works.  This is why I am considering not going through with the PhD and just getting a job, although not ruling out the possibility of going back later when I have a more clear idea of what I want to do, after narrowing my interests on my own time.  I am not interested in a job in academia at all but rather I just want to have a high-tech job where I can make something novel and useful - which in some cases might be more accessible with a PhD, but I think is also possible with just a Masters.
That is a tough decision, but do you think it's mainly the project or just the whole concept of PhD that isn't appealing? Would it help to switch projects or advisors? It sounds as though you have a good fit with your internship, so perhaps it would be a good to gain that work experience and, if you want later, return to school with a clearer idea of what you want to work with (as you mentioned). 

With regards to the type of job you want in the future, have you spoken to other professionals to gauge whether or not a PhD is really necessary? That might help in your decision as well. Good luck!