mine was exactly the same, pedal felt a bit spongy at the top, the brakes worked fine when pressed, but the initial sponge didnt fill u with confidence. bled the system god knows how many times, including pressure bleeding machine thingy, no change

wonder if its to do with the bias pots, or the smaller master cylinder?

iv done away with my 1.3 kit now, fitted an rst master, and the bias pots r gone and replaced with a proper in car bias valve, so fingers crossed the spongy pedal wil be gone