Severian

That's pretty messed up. I know sometimes programs will switch you to Masters if you couldn't get into the PhD program. But you still shouldn't get a rejection letter. Did BU give you any funding? Maybe more people declined BU's offer than they expected.

MIT BE interview weekend was couple weeks ago and they already sent out acceptance letters.

I don't think open slot/quota is really an issue. Grad programs typically over admit people because not everyone will accept their offer (even at top ranked programs). I submitted my BU BME app couple days before the Jan. 15 deadline and I received an offer in mid-Feb. But I didn't hear back about funding until couple weeks ago. Well no one is going to be rude in rejection letters. Some people can apply again next year and get in. But I do agree that rejection letters are very generic and uninformative. If you plan to apply again next year you should call up admission people and find out why you didn't get in.