Kep,
So, I had the first symptom but not the second when I went to fix my 95 camry wagon with a soft pedal in the first place. Then it finally started losing fluid but this was actually a second problem not an exacerbation of the first.
Kind of like when your alternator goes and the low battery sulfates and leans on your starter while you're trying to remedy the problem and you end up replacing all three.
So I don't believe that, in my case, the one symptom caused the other but bad things happen in threes (hopefully good things too).
I believe the soft pedal came from caliper pins hanging up. When I pulled stuff apart the brake pads had that angular wear pattern and I had to pound the pins to get them to move, so I believe the rotor was kicking the pads out after each application so you had a little more travel to apply the brakes as the pads skewed and maybe water absorption could have contributed to less than perfect hydraulic force.
Now, I have to admit I use the if it ain't broke don't fix it school of brake maintenance so I've had a few rigs that have had some pretty murky looking brake fluid. But I generally figure that, in a car that age, something will break often enough to get me some fluid exchange. And I do use DOT 4 low moisture absorption.
So in my case, the follow on problem was a very small leak in one of the 90 deg. bends coming out of the Rear proportioning valve that always rot. They did on earlier gen camries and they do on these.
Now your secondary symptom, travel to floor, could be master cylinder bypass, and if you have really gruesome fluid it may have attacked the master a bit. Although when I took my master apart, it was clean as a whistle inside, no leak out the back and didn't seem compromised. Because of the continuing symptoms after I replaced the leaking brake line, I replaced the master, but that didn't cure the symptom so, in my case, I believe the master was fine all along.
But, as I mentioned on
the thread I started the problem turned out to be that the new pads I put on were too tight on the inside of both front calipers. I actually had a friend putting the front on while I was messing with the brake line replacement, but I'm not sure I would have thought they were too tight. I would have noticed they were tough going in, but aside from lubing the tabs, I might have let it go. As soon as I ground off the tabs to allow easier travel in the caliper the brakes and then pedal slowly drops problem went away. A toyota dealer's service manager had suggested I look for pad hang-up and he was right. I still haven't figured out how it the pad hanging up could keep causing that problem, cause I figure it would stick once applied as well as during application, so you'd get hot brakes and slow release to alert you to the problem, but that is not what I experienced. And you couldn't pump it up, it kept doing the same thing over and over.
Oh well, it's fixed. Now I'm trolling the web looking for the answer as to how it made that symptom.
Sounds like you got to start jacking up corners of the car and looking into stuff.
Report what you find.
Brian