Just in case you don't see my responses before I sign off....
That Masters folder should have all of your pictures...the actual files...assuming you've used iPhoto all along and are letting it manage the photo locations. I'd suggest copying that folder elsewhere. Better yet just copy the whole "iPhoto Library" thing.
After that check out this document:
http://support.apple.com/kb/ht2638
That shows how to run iPhoto to repair the library. Worst case if that doesnt work is to create a new library and reimport your photos from the copy you made. You'll lose all of the tags, etc. you might have put on photos but the most important part...the actual photos...should be good.