This opens interesting posiblities. According to rest of the official story, Makuta attempted to create masks that villagers can use shortly before his betrayal. This implies that these masks did not exist at the time.But if we follow the quote, these masks were existent back then. As others pointed out, the quote seems to conflict even with post-betrayal story. But quote does not say that the villagers had the powered masks after the betrayal.
To find a solution, let return to G1. Before the great cataclysm, Matoran lived in the city of Metru Nui at high level of advancement. When the dark spirit Makuta betrayed Mata Nui, city's inhabitants, the Matoran, were locked into Matoran spheres. They grew smaller and weaker, losing memories of the city. Metru Nui's protectors, Toa Metru, managed to resuce the sleeping Matoran and carried them to safety. There, they awakened them, becoming Turaga in process.
Then, we have Ultimate Mask. In G2, Makuta turned mad by creating a mask imbued with all of elements. It seemed like something possessed him. But why this happened? In G1, six Toa of different elements could create Toa Seal. To be broken, the Toa had to apply their powers back into the seal. In G2, the Toa are personifications of their elements.
My theory is as follows.
In the time before the time, the Mask Makers have crafted powerful masks for inhabitants of the island. Six heroes called Toa protected them with powers over the elements, earning them name protectors.
But all was not well.Ekimu was more skilled crafter of two. Makuta too wanted to make good masks, and so imbued one with power over six elements. He did not know that this would cause a great cataclysm...
Long ago, a spirit of destruction dwelt on Okoto. Six heroes called Toa came to the stars to defeat him. They managed to seal him under the Capital of Okoto, and returned to the stars. In newfound times of prosperity, Mask Makers imbued six Okotans with powers of the elements, creating a new generation of Toa.
When Makuta donned Ultimate Mask in the Capital City, he accidentaly unleashed the spirit sealed here by his inexperience. Fusing with Makuta, the ancient shade began to crack open the island. Ekimu fought with possessed body of his brother, managing to knock the mask off his face. Resulting shockwave knocked out both brothers, sent the ancient city and Makuta's spirit in the shadow realm, and reshaped the island.
The Great Cataclysm weakened the Okotans, causing them to lose their mask powers and memories. The Toa sacrified their powers to awake Okotans, becoming the protectors.