I've searched on forums and tested it myself and it seems that the Dual Casting perk does not work with Master Level spells which are already wielded in both hands.

Is this a bug or working as intended?

The problem is that Master Spells aren't nearly as powerful as Expert Level spells which are Dual Cast. Eg. Frenzy affects higher levels when Dual Cast than Mayhem does (both of them with maxed perks).

It makes no sense to bother then with Master Spells which take longer to charge and are inferior to Dual Cast Expert Spells.

It seems counter intuitive that Dual Casting doesn't work with Master Spells, even if you hold the spell in both hands with a Master spell you should still be able to overcharge it by hitting both buttons...

Does anyone know if Bethesda intends to fix this?

Doesn't look like a bug to me, so probably no.

Well almost all master spells have a large AoE, so they're not completely outclassed. Though I have to agree that Beth dropped the ball on the whole master spell gimmick. I have no idea if they intend to fix this issue, but even if they did it would be incredibly difficult to dual cast them anyway, given how much magicka they eat up.