I doubt that it is air as air is compressable and the pedal would continue to move.
As Gord said it could be linkage, something dropped out of place preventing the piston in the master from actually moving, perhaps when you pumped it back on day 1.
Tha fluid drippling out of the master posts when you loosened fittings at the master would indicate that there is a fluid path on the outlet side so seems likely that the master piston is not moving for some reason.
