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I had almost the exact same senario as you about a year ago, but I had little to no pedal at all. I bled the brakes myself and two other Volvo shops bled them and the pedal still went to the floor. I traced it to the front calipers that I bought from Carquest. I bought new front calipers from Groton and also replaced the rubber brake lines, distribution block, and the MC. Now a year later, the brakes work fine, but the pedal still is not as firm as I would like it. You may never get the pedal as high as you think it should be. As long as the pedal isn't on the floor and the brakes work fine, that may be all you're going to get at this point. Trust me, I spent (aka wasted) a lot of time and money chasing the low pedal problem. If you still have the original calipers, throw them back on to see if the pedal returns. I had already turned my old calipers in so I did not have that option.
You can isolate the various parts of the brake system. Dead head the MC using blank plastic plugs and then check the pedal with engine off and running to see how the pedal feels. If it's good, then you can move on to other parts of the system like the brake lines and calipers.
Are the brakes working normally other than a low pedal?
DeWayne
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