Could a Masters degree actually make someone a less employable candidate?
I would actually think it is precisely the opposite: generally, a computer science Masters requires a thesis, and that thesis usually involves writing a big chunk of functioning code of some sort.  Accomplishing that indicates that person is capable of a accomplishing a large and complex task with minimal supervision.  With an undergraduate degree, you don't necessarily know whether they've ever built a real program that wasn't handed to them as a pre-digested problem as part of their curriculum.

Now, if somebody was a giant company looking for "cannon fodder" programmers to grind out massive repetitive projects, maybe that could be a minus.  Likewise, you have to pay people better when they've got a Masters, commensurate with their increase in skill, so if somebody is looking for low-quality coding work, a Masters could make a candidate overqualified.  However, if you're thinking about eventually moving toward more research in your career, do you really want those sort of jobs?

I know for a fact, however, that the company group I'm in rarely even considers hiring people without at least a Masters.  A number of others I know are similar: the more cutting-edge or research-oriented a company is, the more that they are likely to value that extra education.