They predicted Buffy would die which would have meant the Master would have taken over and so there really wouldn't be slayers and watchers around anymore; the Master would have ruled he earth.
But the Master's rising wouldn't have stopped other Slayers from being Called. Kendra was Called by Buffy's death, whether she was brought back to life or. Buffy's death was the reason the Master ascended, but that didn't affect the Slayer line. The Master might have taken over the world, or at least a huge part of it, yes, but that wouldn't have stopped a Slayer's death Calling the next girl to power. And all Slayers need Watchers.
It's been a while since I watched S1, so forgive me if I've got this wrong, but didn't Giles say that the Codex held prophecies that were directly linked to the Slayer?
Now, obviously, we don't know which Slayers. Some could be Buffy, some Faith, Kendra, Kennedy, Lucy Hanover, maybe even Fray. If Giles really thought that much about it, maybe he gave it back to the Council after the events of Prophecy Girl.
Someone, I think it was Angel, said at one point 'Don't believe everything you're foretold'. Prophecies are supposed to be these huge and powerful things, but they can often be misinterpreted, as was proven on AtS with 'The Father Will Kill The Son' and 'There Will Be No Birth', so I still think Giles figured that prophecies, especially ones written thousands of years ago by men who had no idea what they were talking about, were a little too hit-or-miss for him to put much stock in.