This is all just a result of sloppy language on the part of people describing quantum mechanics.
The state
$$ \left\lvert \Psi \right\rangle = \frac{1}{\sqrt{2}} \left( \left\lvert \uparrow \right\rangle + \left\lvert \downarrow \right\rangle\right) \tag{1}$$
is a superposition of the two orthogonal states $\left\lvert \uparrow \right\rangle$ and $\left\lvert \downarrow \right\rangle$.
The state is unlike either basis vector alone.
A velocity vector
$$\left\lvert v \right\rangle = a\left\lvert x \right\rangle + b\left\lvert y \right\rangle \tag{2}$$
for some values $a$ and $b$ is also a superposition of two orthogonal velocity vectors.
It is unlike either basis vector alone.
Talking about $\left\lvert \Psi \right\rangle$ as "simultaneously in both states" is just plain sloppy.
It's a superposition.
It's not like either basis vector alone.
It is, as you say, something completely distinct.
However, you can often find a description of superposited states as a system being in both basis states at the same time (e.g. the spin being simultaneously up and down), but I have never found a similar description regarding vector quantities (for example velocity being along z axis and x axis at the same time if the vector was somewhere between these axes) in classical mechanics, despite both situations being a result of addition of the basis vectors.
The reason for this disagreement in language comes from the fact that, in the end, quantum state vectors tell you probabilities of experimental outcomes.
It really bugs people to think of the state of a physical system being fundamentally probabilistic.
When it comes to measurement, the state $\left\lvert \Psi \right\rangle$ means that the system has a 1/2 probability to be measured spin up and and 1/2 probability to be measured spin down.
People don't naturally think about the world around them in terms superposition states whose coefficients correspond to probability amplitudes.
They'd rather think about the classical states independently and try to form some kind of notion of the system existing in combinations of classical states.
Therefore, they naturally (but erroneously) say that the system is in both classical states at the same time, when really, as you said, the system is in a state that's completely different from either classical basis state.