Yes, it could be that you need to bleed the brakes. But that wouldn't cause leaking in the engine compartment.
It could also be that the pistons or piston seals in the master cylinder are worn (or the cylinder walls are scratched), causing osme of the fluid to bypass the piston instead of being pushed down the brake line to the brakes.
If your master cylinder pistons are bybassing, its going to be tough to bleed the brakes. So take the brake lines off of the master cylinder and thread plugs into the holes on the master cylinder. Make sure the reservoirs are full, put the cap on, and then get in and stand on the brakes. If the pedal slowly sinks down, you need to replace the master culinder..
1977 CJ7, AMC360 V8 w/ headers, DUI HEI, Edelbrock intake, Holley 4150 carb, , TF999, D300, D30 front and AMC20 rear with 4.56 gears and lockers both ends, 4" susp lift, 2.5" body lift, 35" BFGs, ARG steering, 8000-lb winch, etc.