How to mitigate bad grade in research on PhD application?
If this project is your only experience doing research, you are right that any admissions committee is going to look at it. My advice would be to put a couple of sentences about it in your cover letter. Briefly state what the project was about, and finish with something like "I learned a lot about doing research even though the final result was a bit disappointing." That will show them that you did put actual time and thought into the project, and in the end the grade given to you by one unnamed project supervisor will count for a lot less than a good reference letter from your Masters thesis advisor.