Not sure how to segregate my issues here. If I had a dollar for every thread I've read about brake issues tonight I'd clear an easy 13 or 14 bucks. None the less I'm in a very common boat dealing with a spongy brake pedal. I've got a 95 4.3 4x4. It's white if that helps All kidding aside I'm up to my ears in this thing and would like to knock it back to at least chin level if I can.
The spongy brake pedal started on it's own with out any justifiable provocation from me so I'm going to start out cheap and simple in hopes of catching a break (I'm not sure if that pun was intended or not) early in the troubleshooting process.
I'm going to bleed the brakes first thing after I get up- As I sit I'm 5 hrs past my bedtime on this thing because it's pertinent that I get on the road as soon and safely as possible with the fewest amount of dollars spent doing so. It's R&D time, I've never bled brakes before but I'm not an idiot and I have the tools.
I got the vehicle around the new year and I've never felt comfortable with it's braking performance. The pedal wasn't spongy like it is now and I always assumed the pads were at fault. The brake dust on it has been terrible so I replaced the pads and had the rotors turned. The pedal travel was not corrected with that fix but it needed done anyways.
My main question here is

1. What do I look at if bleeding the brakes doesn't solve my problem?

I won't have time to update this every ten minutes and wait around for any input to show up while I'm working on this so I'm hoping by the time I get up at 11ish you guys will have some stuff for me.
My second question as the title suggests is about the vacuum system.

2.Can I rule out my vacuum system troubles as a culprit to my brake problem?

I found my vacuum reservoir filled up with transmission fluid about a month ago and I've got that kind of nailed down to a vacuum actuator switch possibly being faulty which may explain why my 4 wheel didn't engage the day I tried to make a u turn through a big mud puddle and got stuck. I'm curious if these two problems are being caused by a central culprit.
I hope you guys can lead the way for me and help me get this taken care of. Taking it to a shop is my very last resort.

 

Main vacuum booster is my thought-seems the most logical issue=but why is is it sucking trans fluid? This seems strange...

 

A faulty vacuum switch on the transfer case can suck transmission fluid into the transfer case causing it to overflow into the vacuum lines for both 4WD and HVAC. The fluid needs to be thoroughly cleaned out of both systems, including the axle actuator under the battery tray. If it's not cleaned out, the trans fluid will deteriorate the rubber vacuum lines. It will also cause the 4WD & HVAC components to operate slowly, or not at all.

The disc brake calipers on the front self adjust with each brake application. Brake pedal height, and how quickly the brakes grab, is determined by rear brake adjustment. Your 95 has drum brakes in the rear with self adjusters. The rear brakes are adjusted when you apply the brakes in reverse but, after each application in reverse, you need to drive forward and apply the brakes to "reset" the adjusters. A gentle brake application in reverse is not enough to operate the adjusters, you need to hit 'em hard. This is all fine and well provided the adjusters and the hardware is not seized up and it's all working properly. Might want to pull the drums and give it a good inspection: shoes, all 4 wheel cylinder pistons are free and not leaking, retainer and return springs are good, backing plates are lubricated and not worn. Very common for backing plates to wear, and or rust, on this style brake system. If not repaired, the wheel cylinders will eventually blow apart on brake application, leaving you with no rear brakes.... not fun