Master's Thesis Validity
One of the most revolutionary physics results of the last century is the Michelson-Morley experiment. The experimenters set out to measure something, but measured zero instead. It turned out that the basic assumption (Aether theory) was incorrect. That didn't jinx the experimenters in any way; instead their names have since become immortalized in undergraduate textbooks and one of them even went on to win a Nobel Prize.

Is it the supervisor's responsibility to verify these things before engaging a student? Maybe, but without knowing the details it's hard to say. In the case of aether theory for example, it's the experiment itself that's supposed to verify the assumption; in other cases, there's still a good chance there's something subtle that you're missing (or why would they engage you to study it?). This means the solution is to talk to your supervisor. See if you can convince him/her that the hypothesis is indeed incorrect, because a basic assumption is incorrect. If that's true, that's quite a result: it means both your supervisor and your supervisor's supervisor assumed something that seemed reasonable enough to engage a student to work on, and then later turned out to be incorrect. If the field at large also made the same assumption then even better.

As for getting into a PhD program, don't worry about it. Showing that a basic assumption is wrong is quite an achievement, and this should be reflected in your recommendation letters. It's possible the admissions committee will read your thesis and find out that you didn't discover anything revolutionary, but that's not a big deal: as illustrated above, proving that something doesn't work / doesn't exist is still a result.