The description of measurement operators in Nielsen and Chuang is as follows:
Quantum measurements are described by a collection $\{M_m\}$ of measurement operators. These are operators acting on the state space of the system being measured. The index $m$ refers to the measurement outcomes that may occur in the experiment. If the state of the quantum system is $|\psi \rangle$ immediately before the measurement then the probability that result $m$ occurs is $$p(m) = \langle \psi | M_m^{\dagger} M_m |\psi \rangle,$$ and the state of the system after the measurement is $$\frac{M_m | \psi \rangle }{ \sqrt{\langle \psi | M_m^{\dagger} M_m |\psi \rangle} }.$$
In order to make a measurement, I'm confused as to whether an individual operator $M_m$ is applied, or if the whole set $\{M_m\}$ is somehow applied.
This confusion stems from: Suppose we have $|\psi \rangle = \frac{1}{\sqrt{2}}|0 \rangle + \frac{1}{\sqrt{2}}|1 \rangle$ and measurement operators $\{M_0 = |0 \rangle \langle 0 |,M_1 = |1 \rangle \langle 1 |\}$. If I can choose to apply $M_0$, then I get outcome 0 with probability $p(0) = 1/2$ and the state after measurement is $\frac{M_0 |\psi\rangle}{1/\sqrt{2}} = |0 \rangle.$ So I don't know how to reconcile the fact that there is only a 1/2 chance of getting outcome 0, yet the system is in a pure state $|0\rangle$ afterwards. Does it somehow make sense that $M_0$ gives me outcome 1 yet leaves the system in state $|0\rangle$, or do I need to somehow imagine that the entire set $\{M_0, M_1\}$ gets applied? Or is there some other interpretation?
It's also possible that I am confusing the measurement outcomes $0,1$ with the basis states $|0 \rangle, |1 \rangle$?