it is. He's been placed on the IL-Full Season list in AAA. I don't think it's possible to so list a player, and then say, "Oh, never mind."
What we don't know (or at least, I don't know!) about Muzziotti's knee injury is not whether it's season-ending – it's whether it is serious enough to threaten his career (beyond the obvious impact that it's cost him an opportunity to play in the majors this year, and prospects don't get unlimited opportunities like that).