Join Date: May 2004
Location: Great White North
It sounds like its either the seals or pieces of the hose breaking up. I wonder if there was incompatible brake fluid that ate away at the seals. Either way, if it was my bike, I wouldn't ride it until I get it fixed.
I would recommend the Brembo 19x18 radial master cylinder, as I have been very pleased with mine (a noticeable improvement in brake feel and power). If that is out of your budget, I'd pick up on ebay a Yamaha R1 (04+), or R6 (06+) radial master cylinder as I have been very impressed with the one on my track bike. They are manufactured by Brembo as well but have a smaller piston dia. 16mm (if memory serves me right), than the Brembo forged unit's 19mm.