Thanks! It was master cylinder fault. There were no leaks, though. I am driving the car again. Took me a while to bleed it. After reading Haynes and forum archives I bought the power bleeder from Motiv products, and it could not push the fluid through master cylinder when hooked up to the slave bleed screw. I bench bleeded cylinder next day and increased the pressure up to 30 psi but it did not help neither. So, after I spent 2 eves of making mess with powerbleeder, previous owner was kind enough to help me out and we did it in 15 minutes by old fashioned two person method without using power bleeder. Go figure.. BTW, what pressure can be safely applied to 240D hydraulic? I am still gonna try that powerbleeder with brakes...

Sergey
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240D '76