Trust me, there is nothing wrong with the master server, it works for me and the other 99% of users.
It is a problem either with your computer or network. Obviously I can't help you fix it since I'm not at your house and can't physically see what you've got running.
The downgrade patch ONLY uses original GTA files, no modified stuff. Plus, you can't extract enough data from it to make the full EXE, therefore it's perfectly legal.
Oh and by the way, the downgrade patch just downgrades the LEGAL 1.1 or 2.0 to the LEGAL 1.0
Why would they want to make it work? Answer these first:
Do Rockstar provide a no-cd crack with GTA? No. Do they advertise that such cracks exist? No. Do they condone them? No. Do they support them? No. Do no-cd cracks violate GTA's EULA? Yes.
Why would the MTA team want to spend extra time coding their game to work on cracked exe files? Not only are they illegal but it also wouldn't make them very popular with Rockstar.
Since you have the legal version of the game, just use the DVD to play it. If it's really that much of an inconveniance, just make an image of the DVD on your hard drive and mount it whenever you want to play the game. Or if you're REALLY pissed about it, go and make your own mod.
Have you tried closing everything else which is running? It's possible that firewall/antivirus software is stopping the game from running.
Are you using a no-cd crack too?