Mark,
From what I can see, the problem with the "Masters division" has more to do with the target market, than anything. This has been the status quo for a long time, unfortunately.
For players that are truly playing "masters level", that portion of the pool population has a different mindset than the lower echelon/Open players. The Open players can be anyone from a recreational player, to someone who piggybacks a vacation to Vegas with some Pool, to a serious poolplayer that has a job and is trying to improve, to someone that is a "low masters level" player that sneaks into the Open, to cash. This covers a majority portion of the poolplayer population.
The Masters Level is a whole nutha segment of the market. This group will always be a much smaller group than, say, the Open level. The typical masters level player is one who has put a lot of time and practice into the game and plays very well. They expect to cash, or even win in any regional tour they enter. They may or may not have a job. Their mindset towards Pool is that it is more like a career, or source of income, so decisions like which tourney to enter are determined by how much money they can potentially cash for and what are their chances of: winning/covering expenses/losing money on the trip. If the prospects of winning and coming out ahead don't look too good, then it may not be worth entering. Basically, the typical masters player is like a junior/up and coming pro player and tries to treat Pool with that mindset, even though they aren't at that level.
That siad, it all boils down to expenses. I would say that most Master level players factor in the large cost of the trip to Vegas, along with the high level of competition, making the prospect of breaking even or ahead, tougher odds.
At the end of the day, I don't see many viable suggestions to improve things. The payouts and money added can sway things. Also, keeping the tourney schedule as short as possible might help. Maybe you can try to bang this event out in as few days as possible. Lastly, maybe you can arrange a special room booking service for Masters players. Offer to pair them up with other single Master players to share room expenses. You can have an additional question on the entry form such as "Do you want to share a room with 1,2,3 others?" This way, they don't have to go thru the hassle of trying to find a room mate.
That's about it, for now. I'll try ot put some more thought into this.
Eric