This is due to the logic I believe. The logic you gave is doing the following:
IsBlank(LookUp(TLESI_UserMasters, UserName = txtUserName_1.Text And Password = txtPassword_1.Text))
This will return true if it does not find a row that matches the 2 conditions. If it returns true then it will execute:
Navigate(pgMasterHome, ScreenTransition.Fade)
The issue, I think, is that you will return true any time the username and password DONT match as well. The lookup returns Blank() when it doesnt find a match which makes IsBlank be true which executes the navigate instead of the error message.