Assuming you have 2-of-3 multisig wallet and you have the 3 seed phrases in different locations. It is kind of confusing me because to me it is still 2-of-3 multisig wallet in which only two seeds are need to make transaction, not three seeds. And also this setup to me is still 2-of-3, not 3-of-3.

I only see the master public key to be necessary if you are not the only one setting up to multisig wallet where the people that setup the wallet will not want to leak their seed phrase or private key to themselves.