MG Car Repair: MG Midget Brakes, master brake cylinder, gray material

Question
I found two posts regarding "soft" brakes on a 1974 MG Midget and we will try your recommended solutions on both of those: bleeding the brakes and re-inserting the old pads to get a tighter fit
with the calipers and the new pads. However, in trying to troubleshoot, my son (18) and I are curious about what we found in the master brake cylinder.  The cylinder was replaced and lines were bled and fresh brake fluid re-introduced a couple of years ago by a local expert on MG's.
But with the top off the cylinder, the fluid seems to have separated from a dark gray material that rests in the bottom of the cylinder.  When the brake is applied, a bubble forms in the gray matter suggesting air I guess, but it never comes to the surface of the fluid. can you provide any insights or is this all normal?  See attached pic

Answer
Hi David,
You must remove the cylinder and at least clean it out. That is not normal especially if the gray fluid is not mixing readily with the rest of the fluid. It sounds like someone has added something that should not be in there. I would clean the whole system and install new fluid (DOT 4 fluid)
Howard