What happens if a letter of recommendation contains incorrect info about me? I'm specifically talking about Ph.D. programs. One of my letter writers is a well-known professor in the field. I did a 5-month research project with him last year through a fellowship from my university, and he knows my research output well, but is a bit scatterbrained. The project in question was considered "graduate level," and took place in Europe. This professor also traveled a lot that year since he was was nominated for an lecture series that had him traveling around the world to give talks at universities and labs. This unfortunately meant that our meetings were less often than we'd have liked, and were usually strictly research focused.

Last year, he wrote a reference letter for me for another fellowship, and he sent me an outline of things he would write about in the letter, asking me to look it over. He incorrectly wrote that I was a masters student (I was an undergrad at the time, to date only have a bachelors degree) and that I spent those 5 months doing work on my masters thesis (it was just an independent research project funded by my home university). I corrected him right away on that, but as I said...he's quite scatterbrained outside of research matters.

I think this professor's letter would carry a lot of weight in the programs I'm applying to since I know he has good things to say about my research skills and work ethic, and his name is well-known. But hypothetically, what happens if a letter of recommendation contains factual errors like that? From my transcripts and CV, it's quite obvious I've never been a masters student. Would that inaccuracy hurt me? Would the rest of his letter carry less weight? I'm probably being paranoid, but I'm curious about what happens if a situation like this occurs.

For those of you who have been on an admissions committee before, how would this impact my application?

Edit: (additional info garnered from comment)

The letter was originally written for my fellowship over a year ago now, and after I corrected the professor on the masters vs bachelors issue, I was told the corrections were made. If he uses that letter as a starting point [for a new letter], I should be ok. He was just keynote speaker for a conference this week so hopefully he's less busy after and more responsive (usually is). He is a European prof and I'm in the US.

(Also adding: the reason I'm slightly concerned and asked this question is because when he wrote the first letter, he had my CV and made that mistake. He's known for being scatterbrained among the entire lab outside of research. He somehow can remember obscure details about my project without needing reminders, though...)
To be honest, I would consider this to be a major flaw and almost certainly invalidate the letter. It may bring to attention the rest of the application, including the potential that it may be invalidated, too.

In my university, I was faced with a situation in which the reference letter had a discrepancy with pronouns. The applicant was female but the referee was writing using male pronouns (ie., he, him, his). We ran the letter through TurnItIn and found that the letter was cribbed from a source from the Internet. The entire application was rejected.

Admittedly, this is an extreme case. Still, it will raise red flags about your application. Our assessment team is rather experienced in these sorts of issues.

I recommend revising this if possible.