Can a project be "too good" for a Master's?
From my reading of the conversation between the two of you, he meant 'too good' in one of two ways:


"Too Good" as in the topic will yield many high-quality results, potentially many publications, and opportunities for continued/extended research.
"Too Good" as in requiring too much time to complete in the typical Master's degree time period, and actually should be understood as "Too advanced" or "Too in-depth". 


In answer to your second question 'will future advisor know the boiling point?' Yes. That is what they are there for, to help guide the scope of your project to a Master's level.