Further research led me to the same document that Mark quoted earlier.
This is the ATA6 specification used by hard drive manufactures.
From my reading, the documents explicitly forbids single drive, Ultra DMA configurations with the master on the middle connector. See section 4.1, Cable configuration for this evidence. (You are using UDMA, mode 3, or greater, or you wouldn't have the problem above.) You have another drive on the end, so this is irrelevant.
The spec also mandates (section A.1.2, Mark's image above) that the Device 0 (master) connector be colored black and at the end of the cable and the slave be colored grey and placed in the center of the cable. No technical reason is given as to why, or whether it would work in a swapped two drive configuration like you have, but it is
The Spec (tm).
In response to your question above, in the ATA spec, the term Device 0 is used as a synonym for master. This is given as definition 3.1.31 in the ATA spec listed above.
So according to the ATA spec, your current setup is incorrect and not guaranteed to work. However, I would guess that the standard of putting the master on the end arose from the problem people putting the master in the middle in single drive configurations, and labeling them this way just makes it easier. For me though, I'd rather just plug them in according to the standard and not worry about it.
John