This is probably best evaluated in the context of the individual institution. Standards differ and both the student and the professor should have a common understanding. Some places it is sufficient to give a good summary understanding of a deep problem or area of research. Others requires some new results, which may be minor or not. Some require publishable results.
So talk to some colleagues and get an understanding of the local culture. It is harder, of course, if you are an external evaluator. In such cases ask someone at the student's institution for a bit of guidance and ask whether you should evaluate based on their criteria or that of your home institution. Some places use external evaluators (also at the doctoral level) to assure themselves that their own standards are correct.
But at this level, the literature review might be more important than other parts, since one of the purposes of the MS thesis is to give the student some practice in carrying out deeper research where the lit review can make or break problem selection.
During the defense, you can be as hard as you like, but you need to evaluate answers for "reasonableness" as much as literal correctness. If the student can demonstrate a reasonable approach to something it may be enough. Requiring correct answers to difficult questions under duress is probably too much. But they should have ready answers to foundational questions, of course.