Well, for starters, things like the Holy Grail are artifacts. They don't follow the same rules.
If you want to manufacture an item that is magical, it needs to be high quality. Otherwise, I'm sure it would just fall apart or explode.
But it doesn't have to look high quality if it's by design.
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Only weapons, shields, and armor must be masterwork. None of the other item creation feats require masterwork items.
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IMHO mechanics wise it does balance the system at the lower levels. It gives characters a slightly enhanced item in the form of a masterwork, and then allows later that said item is made magic without having to re-purchase an item again. Not a huge expenditure, but if you are playing in a low-gold game where money is tight, then that is a big difference. As for looks, Tiny Coffee Golem had it right.
Has anyone heard why magic items need to be masterwork items? On the one hand it makes sense that if you are crafting something of that sort you would try to use the best materials available to you. On the other hand things like the Holy Grail from Indiana Jones are most definitely not masterwork items, and I could see wanting to use a normal item intentionally to "camaflauge" an item (without access to a detect magic, who is going to try stealing that stick that looks like it the was picked off the side of the road by the old man).
Mechanics-wise, I can't see the extra 100-300gp making that much of a difference for anything but the most simple and cheap items so it doesn't seem to be a way of balancing the system.
Meh. d20 legacy.
Before d20 was even a glimmer in the industries eyes, 2nd Edition Dungeons and Dragons was all the rage. There was never any such requirement then. *shrugs*
I remember seeing the movie Damien Omen III and the daggers therein; they were thin little stilettos of some dark metal.
Excalibur (1982) on the other hand, had a (clearly) masterwork sword that looked almost out of place in Arthur's Medieval England.
What is "masterwork" anyway, but "the best 'a people' can make at a certain point in time?" Would a string of beads and animal teeth made by a hunter-gatherer tribe still be as capable of enchantment? I'd like to think so.
Perhaps in the general knowledge of modern Golarions, the CRAFT of making magic items calls for very fine craftsmanship of the finest materials because that's what the enchanters call for. Their magics are potent after all, ...and perhaps there is some rivalry between the various races to compete with one another over "great works" to rival the elves and the dwarves. Perhaps in ages past, a string of beads and teeth was less-easily enchanted, but was made all the more special by that fact.
Meh. d20 legacy.
Before d20 was even a glimmer in the industries eyes, 2nd Edition Dungeons and Dragons was all the rage. There was never any such requirement then. *shrugs*
Maybe not in 2e, but in AD&D magic items had to be of finest quality to be made into a magic item.
And about the OP's comment about the Grail: Stainless steel knives are always shiny. High carbon steel knives are not necessarily, shiny, but generally, the high carbon blade takes an edge easier, and holds it's edge longer. So, high carbon steel, though not as shiny, is actually the masterwork product; in comparison to stainless steel.
Not to say that there isn't some very fine stainless steel cutlery to be had out there.
Because you're not supposed to play a character with any kind of attachment to his/her equipment that s/he started out with. You use equipment and then discard it always for the next "greatest thing". No, your backstory about how this sword was in your family for seven generations does not matter one iota, if it's not masterwork (and if you had it at first level, then odds are, it wasn't masterwork) then you're supposed to chuck it to the wayside.
What do you mean, you're a Samurai and your tradition dictates that part of your very soul lies in that (non-masterwork) blade? Don't mean nothing, no-sir-ee.
*Snort*
My first D&D character ever was in 3.5. She was a Rogue and her short sword wasn't actually hers, but one of her early "acquisitions" from a jerkish rich man who didn't really need the blade anyway. Nevertheless, she did use it, despite the guy's name being etched all over the sword. So when the time comes that she needs magical gear, we contrived that she had the sword smelted down and reforged into itself, but this time masterwork (with the weaponsmith trying to reproduce the names the way they were before he started) so that it could take a magical enhancement.
It worked at the time, but always struck me as clumsy and unnecessary.
At least in Pathfinder, there's a "Masterwork Transformation" spell to let you have a weapon feature in your backstory that you can have at first level and still use later in the game.
Still unnecessary, though.