Dave,
Looks like my attempt at replying to your post didn't quite make it to the list.

Basically what I said was that you should definitely do the cheap and easy things first.  Bleed the brakes and see where that gets you.  If that doesn't help, then you've got bigger problems.  If, no matter how much you bleed, you still get bubbles coming out from the bleeder valve, look at master cylinder or look for a leak in the system.  

Your problems can definitely be caused by air in the lines, and bleeding is easier and cheaper than master cylinder replacement.

Goodl uck,
Sean