By default any pages not found in the _Layouts directory have their MasterPage set to the token of ~masterUrl/default.master. This refers them to a property of the SPWeb object stored in SharePoint called
MasterUrl which holds the path to the masterpage that will be used. In a normal site this property is set to _catalogs/masterpage/default.master, which points to the default.master file in the masterpage gallery of the site. Until the page in the gallery is customized it points to the default.master in the Template/Global directory of the 12 hive. You can use SPD to select a different .master file to be associated with each layout page, but that is page specific. Never actually edit the default.master page in any sharepoint installation, always create a new masterpage and customize that one, then have your site refer to the new masterpage file for either it’s default or custom masterpage property.
You can also use SPD to edit the .master in the Site’s master page gallery, which would apply to every page in the site. You can also use the SharePoint Object model to write a program that will modify the MasterUrl property of the SPWeb object which will change the masterpage for the whole site without unghosting objects to the database like SPD will. Finally, you could edit the masterpagefile attribute of every page using SPD to change what masterpage it uses.
If you are using publishing features. that means you changed the layout template from which new pages are created. This will not change the page after it has been created. It will change any new pages created. To change the already created pages you would need either change the global setting or edit each page.
If you are going to hardcode the setting I think you want the address ‘~site/_catalogs/masterpage/default.master’. I don’t think the address you are using will be evaluated as valid. If the site doesn’t find the
specified masterpage SharePoint will fall back to the default.master in the 12 hive. So your problem may be that you are either changing the layout template in publishing or that your masterpage address is wrong.
