First thing we did was swap out the vacuum booster check valve. That helped the goofy push back on the pedal. Then Chris jumped in, started it, and proceeded to power through the brakes on dirt in 2WD.
Jacked up the truck and put jack stands under it. Put it in 4L, 4H, 2H and played with the brakes. It took 80% of the pedal travel to stop the wheels from spinning, in the air. Only took letting off a small amount before they spun again. In any gear, it would power through the brakes like nothing.
Then we ditched the 2005 Suburban MC and prop valve.
Put in a 1 5/16 1985 K30 master cylinder. Running straight line, no prop valve. We bled the MC for 15-20 minutes, just pumping and pumping until all the air was out. Then bled all the calipers, again taking lots of time to make sure the air was out. All corners bled fine, free flowing, clean. Then sanded down the rotors because they were a bit glazed.
Started the truck and again performed the same tests. No difference, at all. While it was idling in DRIVE and 4L, Chris tries to turn the tires by hand while I hold the brake. Unless I have my full force on the pedal.....he is able to rotate the tires.
The pedal doesn't feel spongy so much as it just feels weak. It is easy to push in, then abruptly ends. It is so easy to push in, I can do it by hand and bottom out the pedal. It does not build enough pressure before it ends, that's for sure. During bleeding, the pedal will hit the floor, but will not while it's running. Even pulled the vacuum off the booster while it was running, just for shiggles, and tried to stop the tires from spinning. It would again power through the brakes easily, like under 1000 RPM easily.
So the celebratory beers came out. Obviously it wasn't a success, but at least now there was someone else going crazy and not just me. Funny, Chris thought I was exaggerating the problem when he arrived. Didn't seem like he wanted to test drive the truck afterwords. Yeah, I know, but I've put 3,000 miles on it like this.

*needs crying smilie
EDIT: forgot to mention, the new K30 booster I got is exactly like the one I already had on the truck. The rods were the same and exterior balloon size was the same too. Doesn't seem to be a booster issue anyway.