Unofficialbmw.com

[Ken Juul]

Every time you step on the brakes you loose a bit of brake pad. That makes more volume in the brake caliper. When you let up on the brake pedal the brake resevoir refills the master cylinder to make up for this increased volume. As long as you have some fluid in the resevoir, the brakes should feel normal. With the leak, and the pedal going to the floor, I would suspect that the master cylinder has gone bad. I have an 87 also, replaced mine about 2 years ago. If your brake master is going bad the most probable cause is corrosion cause by not changing the brake fluid at least every 2 years. There is a very good chance the clutch slave and master are not too far behind.