Hello there, sorry I've not followed this one up sooner. I've just not had the time recently.
To answer a question above, I've pushed around half a litre of fluid through the rear bleed nipples and about the same from the fronts.
On Monday I had an interesting conversation with my friendly MOT tester whilst he was MOTing my 1 series and he suggested all the things I've read, PLUS, he said try putting brake line clamps on each brake line near the caliper, then press the brake pedal and gauge how firm it is. If it is completely firm then remove the clamps one by one to see where the problem is. What an excellent idea!
I've purchased 4 brake hose clamps and last night got busy putting them onto each brake hose, by each caliper. I started the car and sure enough the brake pedal was pretty firm. It still travelled a little way and wasn't TVR-Tuscan like in its feel, but it didn't go anything like as far as without the clamps, as you'd expect.
Next, I thought I'd remove the right rear clamp first. I did one and there was a tiny bit more movement in the pedal, which I expected since the piston is now pushing the pad onto the disc. I then removed the rear left clamp and found the same thing with the pedal. All good so far, the rears seem to be behaving themselves and pedal travel is still negligible.
I then removed one of the front clamps and the pedal sunk a lot. I removed the final one and it again sunk a lot more. So it seems there's a problem with the fronts. I whipped the brake bleeder out again and bled another half litre through the fronts, wildly tapping them with a mallet as I went, but alas I saw no bubbles and this was with the pressure bleeder up at 24psi.
I decided to have a close look at the pads and ensure that they aren't too snug in the caliper as I'd noticed they were a little tight when I very first looked at them. However, my indy has done a beautiful job and they move perfectly freely in the calipers. I decided to take them out anyway and examine them on the workbench and to my surprise I could see that they have worn irregularly. i.e. as you look at the pad in place in the caliper, the half of the pad on the lower side has worn much more than the pad material at the top half. When I say much more, I mean only a mm or so. However, having looked this up, I now have hope that this may be the cause of the problem.
I'm off to NY next week (wooo) so can't do anything about it before then, but if I've not spent all my money in NY then when I come back I'll replace the front pads and see if this makes a difference.
Last night I googled a bit more and found one brake troubleshooting guide that said that if you've bled the brakes half to death and the pedal still has a long travel then it could be the pads are worn unevenly. So now my eggs are firmly placed in the one basket. Fingers are crossed and I'll let you know what happens.
Thought I'd add a pic, this is NOT my pad, but it's similar, although mine is slightly less extreme in its wear:
