On of the hero victory conditions in the Castle Daerion quest is to defeat all master monsters. Does this mean that all master monsters have to be out of play at the same time or do you only have to defeat them each once? If one of them is brought back into play as reinforcements does that mean they are no longer defeated?

None must be present on the board.

Reinforcing master monsters are not the defeated ones "coming back", but additional ones that the heroes must eliminate.