As far as brake fluid is concerned I like Castrol low moisture fluid. Its a DOT 4 fluid, therefore compatible with others (except silicone fluid) and is touted as absorbing less moisture than other fluids. This means it will maintain a good pedal feel and hopefully reduce the potential for brake lines rusting out from the inside (leading to leaks). Its still a very good idea to change brake fluid every 2-3 years.

If pumping the pedal firms it up, and it stays firm, you still have air somewhere. More bleeding is required. If the pedal still goes down, you have a leak. This may be external, and you can find it if you look hard enough/lose enough fluid. Or, as you suspect, it may be a bad seal in the master cylinder. Sometimes the fluid will leak out around the actuator for the master cylinder. You might see fluid on the firewall or under the rug. This calls for a seal kit for the master cylinder. Parts are relatively cheap, and the job is not too tough. If Girling fluid has not been used, you have a bigger problem.