I recently studied in Shulchan Aruch (Yoreh Deah 283:4) that it is forbidden to embroider a pasuk on a Tallit, and Magen Avraham (45:2) applies this for a bracha as well. Given the popularity today of Tallitot embroidered with the bracha "lehitatef b’tzitzit" on the top center, do they become pasul for use? Does having one and praying with it bedievad fulfill the mitzvah of wearing tzitzit?

The prohibition of writing a pasuk on a Talit is based on the Rambam who specifically forbids the writing of pasuk. One of the reasons according to the Rambam, is what is mentioned in the Magen Avraham you quoted. Namely, if one would wear his Tzizit in the toilet and if there is a pasuk on it, it would be disrespectful. (There is another reason brought in the Rambam which is not relevant to your question). Though the Magen Avraham does not mention the Bracha embroidered on the Talit, the same would prohibition should apply here due to the disrespect as you correctly said. However, in our times we have a Talit which is worn especially for Tefilla, and because of this, the Achronim forbade to wear it the bathroom even if there were no pasuk. This is contrary to our talit katan which we wear all day and may be worn in the bathroom. (See Shulchan Aruch Orach Chaim 21, Taz and Mishna B'rura.) Therefore, there is no problem with Talitot embroidered with the Bracha and one fulfils the mitzvah.Even if someone were to decide to be disrespectful and wear it to the toilet it would not disqualify the Talit. The same way for example if one would take a siddur into the toilet, the siddur will still retain its holiness. [On the other hand, according the other reason in the Rambam, a pasuk may not be written on a talit.See Bet Yosef Yoreh Deah 283 and Shach 283:6]