[SalesForce] Unable to create Master-Detail relationship field

I can't offer you any insight into why you cannot do this, you just can't unfortunately, it's a seemingly arbitrary limitation of the platform and the Product2 object. Unless someone who knows about the internals of the platform comes across this I doubt you'll ever get a definitive answer.

In terms of working around it though, the only way to achieve this is to create your lookup as a standard non-required Lookup and then enforce that the value of this lookup cannot be blank using a validation rule.

Your validation rule will look something like this:

ISBLANK(ProductId__c)

If the Product is deleted then this will result in the value of the field being cleared, as per the default 'Clear the value of this field.' behaviour, which will prevent you updating the child record until a valid lookup ID is entered.

If you want to change this behaviour you'll have to write a before delete trigger on Product2 with your desired logic.

You can only have 2 Master Detail relationships to a Custom Object therefore you would either have to change one of the existing M:D relationships to a Lookup or use a Lookup in this case.

Probably the most important question here is which objects does this custom object need to inherit visibility from and do any of the other objects require things like roll up summary of the custom object's fields.