I agree with datoman, I had a similar problem. My problem was the rear brake adjusters, they were siezed.
It took three pumps of the brake pedal to move things back were they are supposed to be before I got a firm pedal.

Tools for back bleeding...............well it's somewhat embarassing to admit but there really are not tools involved; many years ago in total frustration over a brake overhaul on one of my beater cars I used a little oil pump can and forced the fluid into the system. I used a piece of small hose, stuffed one end on the bleeder valve and metal pump stem, zip tied the ends..........then, Pump and hold then close the bleeder let off the pump handle, open bleeder pump in more fluid close bleeder, repeat several times............this is a total road side hack mechanic method but it works. I now have a mighty-vac tool.

Finally I'd be willing to bet that the brake hose in the rear is still the original............because it's away from the drums up in near the driveshaft tunnel they seldom get looked at.

Tom, the idea of back bleeding seems to be tough for me as i do not have the correct tools to do the job..but i'll have the brake lines inspected. The age of it - i have no idea, since i bought it from an owner who dont have a history of it..hope its not as old as the car (43 yrs old)..anyway, I'll get this changed as well...

The bleeders are to the top, no issues on this. And i'll try to find out where's the problem coming from by isolating the front & rear..

When you mention the pistons rolling back, could it be that the proportioning valve is not holding the pressure due to a faulty valve? I've checked for other sources on the internet and some of them are saying that a bad proportioning valve can cause either low brakes or wheel lockup.

When you rebuilt the calipers did you put them back on the correct sides of the car... bleeders to the top ?

Clamp the flexible hoses at each wheel
Try to isolate whether its a front caliper or the rear causing the issue

My guess is the pistons are rolling back on the seals when you release the brake and they have to travel too far to reach the pad/disc each time causing the low pedal

I back bleed the system (pump the fluid in from bleeders) or use a tool know as Mighty-Vac. Get the car up on jack stands and have someone put the brakes on and examine the connections. Also how old are the brakes lines??

Tom

answers to your question:-

-no leaking fluid
-no vaccuum leak
-new master cylinder

-initially had air, but its completely fluid squirting out now
-master cylinder bleeding - i didnt do this, thought that bleeding at the brakes end would be sufficient. Do i still need to do this even after i have used up almost a litre of fluid for bleeding at the brakes end?

-rear = drums. Already adjusted until the wheels wouldnt turn, then slightly loosened it until i can feel some level of resistance

it is either leaking fluid somewhere or sucking air or the master's not working.

do you get any air when bleeding the calipers?

did you bleed the master cyl?

what are rear brake pumps? wheel cylinders? ie drum rear brakes? have you adjusted them?

Can it be that the proportioning valve (a.k.a brake body pump) is faulty?
As i know, it has a one way valve to hold the pressure. What if the valve is damaged? Fluid can travel both ways and there's insufficient pressure to the brakes...

Hmmm..does this makes sense?

No. Fluid level never drops, unless i bleed the brakes.

Are you losing fluid at all??