If the pedal is spongy then bleeding it will resolve it. If, with constant foot pressure, it gradually descends to the floor, then bleeding it will not resolve it. Ziptar, in your case a spongy pedal must have seemed like it kept descending as it is impossible for a constantly descending pedal to be cured by bleeding.
Hmmmm, now that you mention it libbybapa, I haven't really tried brute force constant pressure since bleeding the brakes. I'll have to see. If the pedal descends under pressure then Master Cyl. is bad, No?
I bled the front brakes when I did the pads but the rear drums were untouched since I bought. So I went to bleed them and there were no nipples either side! Broken off? Damm now I need new wheel cylinders and a master cyl also. The number of things I'm finding wrong with this car is just too many.
DON'T GIVE UP!!!!!Stick with it, while it may have issues from neglect or a doofus previous owner once you get an MkII Diesel up to snuff it'll probably out last you. I still have lots to do to to mine and probably another $4000 (or more) to spend but, I care. I own the simplest, most reliable, and durable car ever manufactured. I think others here will agree. While you may be finding stuff wrong, the MKII is so simple there should be relatively few.
My wife just rolls here eyes every time I say it but, I think MkII TD is a technological marvel and
THE finest vehicle ever manufactured

. She just thinks it is "old". Well SO AM I!!!!! When my wife gives me a bit of torment about the work and money I've put into "Bubbles" (My daughters named it that.) I say to her "Look at this way, it is a 2 for 1 deal. I get a car and you get a coffin for me because I am driving this car to the grave.".

Ok, that being said and motivation aside.

After the bleed, how are the brakes? Do they work OK and you can drive safely for now The I suggest a plan

, Upgrade to 10.1 fronts and rear discs. Since you need a master, and rear wheel cylinders anyway you might want to see if you can pickup a 10.1 brakes, 22MM master and, rear disk at a yard near you or cheaply on the vortex. The 10.1 fronts and master cylinder can come off any MkII GTI/GLI or an 4x100 MkIII, just look for "Girling 54" cast into the calipers, you'll need the knuckle and everything with it. Some are of the opinion that the rear discs are horrible on the MkII but I like them, mostly because I hate working on drum brakes. You can do the upgrade piece meal if you upgrade the Master cylinder first (pedal will stiffer until fronts are done). While there are more awesomer brake upgrades out there, for the money and simplicity, the factory 10.1" is unbeatable

Used stuff available in the vortex:
Rear calipers and carriers
http://forums.vwvortex.com/zerothread?id=439799422MM master
http://forums.vwvortex.com/zerothread?id=4417866$10 22MM Master
http://forums.vwvortex.com/zerothread?id=4353059&page=122 Masters
on ebayI'd get a new master but, that is just me, used masters give me the heebeegeebies. Either way, the upgrade (once bled correctly) is really nice.