I have an 83 so brakes are a little different. Right after I bought this bike I went through the brakes. When I went to rebuild the MC I found that the cylinder had corroded and there was no way to get a clean bore, so I replaced the MC with new that had an oversize piston and it works great, the 83 hand brake only operates on caliber and I think I could lock the front tire if I tried to but that isn't a good idea, point is it give me plenty of stopping power. Lots of good advice here on how to bleed the system.
I agree with Dan, the whole system hast to be right. As for Orifice size, controls flow only, not pressure, basic hydraulics. If the orifice is restricted the MC may not be able to deliver enough fluid for adequate braking, but it shouldn't have any effect on spongy brakes, that is almost always air. If a MC seals are bad the fluid can bypass the seal and also cause a spongy pedal or grip.