You have received some good advice on getting the air out of the system to correct your spongy brakes. No answer on your first problem, though, about fluid running out of the breather holes in the cap.
Each time you press the pedal, a small jet of fluid squirts out the tiny hole in the bottom of the reservoir. In most cylinders, that jet of fluid hits the bottom of the cap. Because of this, caps are made with baffle systems to turn the fluid back into the reservoir. Original GM caps have a stamped sheet steel baffle pressed into the bottom of the cap. Aftermarket caps vary in design, but all have some sort of baffle. Yours is missing or damaged, I'd guess.
Joe
