Brake fluid is hydroscopic, hence the reason to change the fluid yearly or you will get pitting and rusting. Any pitting and/or rusting is bad. get a new master cylinder. Then check the wheel cylinders, if you have rust in the master cylinder, most likely the wheel cylinders are toast as well.
Find someone with a power bleeder when you are done (or rent one). I was lucky and a co-worker was a former ASE mechanic that decided to go into design. I did 3 brake jobs and had them all bleed in less than a half an hour.
If during bleeding of the brakes the fluid is brown, keep bleeding until it is as clear as new fluid.
