I have a master document that uses INCLUDETEXT to pull bookmarks from other documents, depending on values selected in the formfield controls in the beginning of the master document. The problem I have is that in some cases, I will need to includetext that contains additional formfield controls to be populated by the end user. However, it seems that I can only populate the formfields in the referenced document, but not in the master document. Does anybody know how to handle this?

Consider using AutoText fields rather than IncludeText fields. I admit that my use of IncludeText fields has been limited. I know that AutoText can include legacy form fields (as well as content controls). Automated Boilerplate Using Microsoft Word
Unless you have a need of them, I would recommend using Content Controls instead of legacy form fields (but not with them).

I assume you are not using the Master Documents "Feature." If you are, read the linked article.