Not to recycle platitudes, but what you get out of school is what you put into it. What ultimately makes the difference between acceptance and rejection with PhD programs is how competitive a candidate's entire application is, not just one aspect of it. While U. of C.'s MAPH definitely has something of a 'consolation prize' feel - I got the same cut-and-paste e-mail from two different faculty members, and it was pretty entertaining figuring out exactly which bits and where got the so-called personalized treatment - if one comes out of it having a clearer sense of academic/intellectual direction, and having made the right contacts to aid in that pursuit, then it's still money and time well-spent IMHO. The sense I've gotten from speaking to several professors during the application process is that oftentimes what makes a candidate stand out is his/her personal sense of purpose and drive, and less the reputation of the BA/MA. Achievement is personal I think, not institutional ...
I was in two minds about U. of C.'s offer. On the one hand, I didn't relish the idea of begging the parental units for another 50K for more school, but on the other I kept hearing - esp. from those faculty on admission committees - that every little bit counts these days, and having an MA does go a long way. At the end of the day though, what tipped the scales was the fact that the prof. I'd applied to study with reached out personally, and seemed genuinely keen on me as a student. He's a pretty big dog in both his field and his department too (and certainly has his pick of potential students), and I figured that if he was taking such an interest in a lowly MA admit then who was I to say no ?
So, yeah, its U. of C. for me come fall.