I've always thought of Phoenix Down on the same level as Medi-Gel in the Mass Effect series.

It'll do the baseline healing / recovery from being pummeled and slashed up and shot along the surface, but it won't exactly patch up a gaping hole through your chest.. i.e severe trauma.

That being said in theory our maiden Masamune victim COULD have been patched up by a Phoenix Down but she probably wouldn't be able to walk again. But hey this was all for the story unfortunately so for the good of the planet there had to be sacrifices.

EDIT: Also I should edit the topic header for spoilers I think.