I have been trying to get an answer to exactly what you've posted too. Yesterday, I found the code below in the Exploring ArcObjects book which allows the user to click on the map and get the coordinates in decimal degrees. Its very interesting to see the decimal values displayed from my map which is in UTM also. So, I know that it can't be a big deal to do what we want, just how.
Since I just found the code, I'll spend today trying to understand everything.
Hope this helps you and I'll keep watch on this thread too.
Private Sub UIToolControl1_MouseDown(ByVal button As Long, ByVal shift As Long, ByVal x As Long, ByVal y As Long)
Dim pDocument As IMxDocument
Dim pPoint As IPoint
Dim pClone As IClone
Dim pGeometry As IGeometry
Dim pSpatialRefFactory As ISpatialReferenceFactory2
Dim pSpatialRef As ISpatialReference
Dim pGeogrpahicCoordSys As IGeographicCoordinateSystem
'get the point where the user clicked
Set pMxDoc = Application.Document
If pMxDoc.CurrentLocation.IsEmpty Then Exit Sub
'clone the point because we don't want to alter the actual doc current location point
Set pClone = pMxDoc.CurrentLocation
Set pPoint = pClone.Clone
Set pGeometry = pPoint 'QI
'create a new geographic coordinate system to use in the conversion
Set pSpatialRefFactory = New SpatialReferenceEnvironment
Set pGeogrpahicCoordSys = _
Set pSpatialRef = pGeogrpahicCoordSys 'QI
pSpatialRef.SetFalseOriginAndUnits -180, -90, 1000000
MsgBox pPoint.x & ", " & pPoint.y, , "Decimal degrees"