So when The brakes are applied with the engine not running, fluid can be heard and seen flowing around inside the rear reservoir. When I say flowing I mean iy shoot up out of there if the lid wasn't on. Is that normal?

Also when I pull the vacuum line off the booster, with the engine running, the pedal is stiff, like it should be. If I put the line back on the pedal goes soft. Way too soft... Also if the engine is off, you have to pump the pedal 2-3 times to get a good hard pedal, as soon as you start the engine the pedal goes soft.

Should I replace the booster and master cylinder or just one of the two?

 

Sounds like your use to driving a car without power brakes. Pedal should be easier to push with the booster connected, thats its job. You get a few pumps after the engine is off because theres a check valve on the booster that holds vacuum for a few stops in case the engine stalls.

With the booster connected, keep your foot on the brake pedal and start the engine. You should feel the pedal drop some. If it goes all the way to the floor, you can have air in the lines, a fluid leak, or a faulty master cylinder.

EDIT: Yes, the fluid shooting up in the master in normal. Make sure the lid is on when bleeding, or you'll have a hell of a mess