Derek,
        The drop in idle is most likely caused by the friction of the throwout 
bearing pushing up against the pressure plate fingers.  Could be you have a 
heavy duty pressure plate with high spring rate - good news; OR your throwout 
bearing is seized and will soon disintegrate - bad news.  Enough joking; I 
honestly don't know if the throwout bearing is of the roller bearing type or the 
plain bearing variety,; the later is just a round lump of machined steel- no 
ball or needle bearings anywhere in sight. I just replaced the clutch in my 
MGB-GT and was surprised to see this kind of throw out bearing.  It too drops 
revs when I'm on the clutch.  
        The spongy feel is either a hydraulic leak in the system, or air in the 
lines.  Bleed it while continually topping off the clutch master cylinder.  You 
might also have a helper pump the pedal while you look for seepage from the 
lines and the master and slave cylinders.  DOT 3 & 4 brake fluid absorbs water 
vapor from the air.  After a while, corrosion forms in the bores of the 
master/slave cylinders which causes leakage past the seals.  A solution which 
has been suggested to me is: Hone the master/slave cylinders, replace the guts, 
flush the lines with alcohol, and then fill the system with DOT 5 fluid.  DOT 5 
fluid is silione based and does not absorb water.  It is however expensive and 
it is a bit more difficult to bleed the air out of it.  Once its done though, it 
is a permanent solution.
Hope this helps,
Brian Corrigan
67 Series V project car
72 MGB-GT daily driver
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