The guy is wrong -- he's a graduate admissions guy.
I didn't mean to pounce on you, I realise you picked up this info from the LSE guys. But don't worry, it's untrue. Your admission is *guaranteed* with a distinction, and your funding is most often looked after as well.
This distinction only exists because of EU funding rules. MSc Econ Research is eligible for ESRC funding, whereas MSc Econ is not. Also, you automatically get your fee waived when you apply to the PhD programme, that's 30 pounds saved :)
There is no other difference between the two programmes. It's just a name change for funding reasons.