Replaced rotors, pads. Lights on dash,(ETS ESP)(BAS)(ABS).
Break pedal mushy but driveable.
From my experience w/power break systems,I'm thinking master cylinder needs replacement.
I had my wife take it to the dealer,they feed back something like a washer went bad causing leakage to damage some sensor and repair will cost $2200.00

Any idea on direction to go from here would be appreciated.

Should I roll over for the dealer (I don't trust em).

I would for sure go the OPPOSITE way of the dealer. Brakes can be serviced pretty much by any inde. i had a situation where I had my brakes bleed because of soft pedal. After driving about 5 miles lots of smoke and the smell of hot pads from the ft left rotor/pad. Pretty scarry so I stopped and
got a tow to the dealer. Had to leave town, so used another vehicle for a couple of days, then followed up with MB dealer. They quoted a need for 4 x rotors, pads, calibers etc etc. I pretty much knew this was over kill as calibers go out seldom. Anyway I had it towed to my home, and a mechanic FROM THE DEALER, came to my house and checked it out after work. Bottom line the bleed had gotton some fluid on the rotor causing the smoke etc when it got hot. Hit it with a water hose with good nozzle pressure and have been driving every since with out a problem.
Go Indie and same major dollars, may need bleed only, or some other minor part in my opinion.

If I rule out rotors,pads,hydraulic lines,no loss of fluid,no vacuum leaks.

And my 2000 Ml320 exhibits symptom#1 can anyone argue the problem might be elsewhere or some other combination.

Symptom#1 Pedal requires a lot of leg, to stop. (points to master cylinder)

Symptom#2 Pedal very hard to push, to stop. (points to booster)