Found an error in a paper I presented at a student engineering conference. Should/can I talk about it in my MS applications?
Reading your background, it seems that everything about the work was correct except for a mistake in translating the algorithm from code to pseudocode.  Moreover, you've done your best at correcting the mistake.  Mistakes happen in science, and especially when it comes to the dread pseudocode (personally, that's why I always include actual executable code whenever I can).

From what you've presented, I think you have every reason to be proud of this work and none to be ashamed. Talk about the work in your applications.  Talk about the paper.  Talk about the experience in getting it corrected.  Anybody who you'd actually want to work for will see all of these as strengths and not weaknesses.