Hey cquin, sorry you feel discouraged. About the terminal MA program, I would get feedback from several different trusted others in your field - and then weigh it all out and see what feels right to you. That's what I did when I was trying to decide whether to apply to Masters programs in addition to PhDs.
My field is psych, not English, but FWIW I'll share the feedback I got. Basically, several graduate students recommended it because they felt it game them a better sense of what they wanted to do - made them more prepared for their PhD programs and also felt it made them more competitive applicants. When I talked to one of my faculty mentors about it, she felt that since I ultimately want a PhD, applying to Masters was a waste. She said she felt that having a Masters did not significantly increase one's competitiveness, based on her experience on graduate admissions boards. Also, I learned that (at least for the programs I'm interested in) most units would not cross over...I wouldn't get to start part way through because I had a Masters. I wasn't previously aware of that.
In the end, I decided I didn't want to do a Masters program because I felt it wasn't the best fit for me. I don't want to dissuade you from the offer; just sharing my experience. I know some people who had excellent experiences in Masters programs and are very happy they earned a Masters prior to starting their PhDs. That's what it comes down to - doing what you really want. Maybe after you talk to some mentors in your field you can get a better sense of things. I've also found that making a cost/benefit analysis can be very helpful - basically just listing all the pros and cons to each option.
Waiting it out can definitely be its own downer. Even if you are not admitted this year, I hope your self-esteem and mood go back to feeling good soon. I think and HOPE that once the whole admissions process is over for everyone, our anxiety levels will go down and we can finally get some peace of mind. And of course, I hope that you are not rejected across the board.