The unequippable version of the Masamune is the key item obtained by the party of Chrono Trigger after they successfully reforge the Masamune in order to give it to Frog. Once this key item is given to Frog, he will permanently join the party, and it will be replaced in the player's inventory by the equippable (but non-upgraded) version.
Lucca or Robo (Depending on who is in your party at the time) would help Melchior out in the reforging.