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The BFL is shown below. The light comes on when the piston moves off center due to an imbalance between the two brake circuits. This can happen during bleeding, with pressure on just one side.
It should self-center after a few pumps, once bleeding is done. If it doesn't, either there is still an imbalance—or it may be stuck transferred and will center itself in operation. Try a few good hard pumps.
You didn't damage anything by depressing the piston, especially with the bleeder open.
Bleeding "master cylinder" again is unclear. And how are you bleeding it (and the total system)? Pedal? Pressure? What sequence?
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Bruce Young '93 940-NA (current) — 240s (one V8) — 140s — 122s — since '63.
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