So we know that the Ruby Knife was thrust into the Mammon Machine and, in time, became the Masamune. This happened in both the pre-Chrono Trigger timeline and the in-game timeline. The details of who thrust the knife into the machine are pointless, either way the sword was created.
Flash forward in time. In 590AD Magus killed Cyrus and broke the Masamune. He knew of it's potential and knew that it could tear down his magic defense. It certainly wasn't the only way to defeat Magus, but Magus identified it as a threat never-the-less. Notice the flashback in 590AD, when Cyrus was killed and Glenn was turned into Frog. Magus confronted Cyrus (and the Masamune) confidently (and a bit cocky, almost), and he certainly didn't act afraid of the Masamune. Thus, I would wager that although the Masamune could harm Magus, he wasn't all that threatened by it. He was swatting just one more fly that stood in his way by breaking the Masamune.
Now here's the speculative part (on my end)...
I think that the sword was never completed in 600AD in the pre-Chrono Trigger "original" timeline. We hear no mention of it past 600AD, and it seemingly doesn't exist in 1000AD (although the broken blade may have been at the Hero's Grave; I can't remember if they actually acknowledge that in-game before the Hero's Grave is completed). So after 590AD it just lied broken, never to be used against Magus.
Never-the-less, Frog was able to overcome the defenses of Magus' Castle and kill Magus even without the Masamune. We know that this happened in the "original" timeline anyway, we just don't know the details.
But Crono and company, not really knowing the true events surrounding Magus' demise, helped fix the Masamune and accompanied Frog in his quest. No matter what happened, Magus was slain/defeated/lost to time in both timelines and his attempt to defeat Lavos failed.
So here's the thing... Did Guardia fall in 1005AD BECAUSE Crono and company reforged the Masamune in 600AD? Is it likely that the fall wouldn't have occurred has they not forged the Masamune? Is the fall of Guardia their own doing?
Had they not have reforged the Masamune, Magus would still have been defeated and the events would have been pretty much occurred the same. The outcome would be no different (or hardly any different).