I've heard some schools do this. True in general?
I'm not saying this is fair, but where I'm at, doing a terminal MS degree implies that you were rejected from every single PhD program you applied to.
It seems that most people in Physics either search for employment after undergrad, or they go all the way to PhD. No one does the MS unless they "have to."
Then again, I don't know how many of these types of students end up applying to PhD programs.