Patience and persistence wins the race (you'll be considered patient if you can get to the end of this stupid long post without losing interest).
We figured it out last night. I found an image online that gave me a clue about the safety feature:
(warning - I'm pretty sure this is NOT an exact diagram for a 71-73 model, but it is I think close - this one doesn't show a spring on the prop valve lower left like we have, and it *might* show a spring in the shuttle valve that ours doesn't have - the unclean chevys have that feature - if you have a spring there - you'll only get an uncentered position -and hence a dash indicator light- if you have a failed cylinder AND the pedal is pushed)
I think the "safety feature" is an interconnect between the shuttle valve cylinder and the proportioning valve cylinder similar to what is shown on this diagram.
Given that thought, here is what I decided to try:
I had the thing in my vice setup like this:
I had the front brake chamber plugged with a bolt as you can see. I had the rear brake chamber live and filled with fluid. The line from MC to dist block was in place and snugged up. I applied hydraulic pressure in the same manner you bench bleed your MC. In the config shown I couldn't get any flow thru to the back brake output at all - no matter how hard I tried.
So, hoping to clear the safety feature, I took the shuttle valve completely out (the shuttle valve is underneath that brass nut on the top of the distro block in the picture). I noted that the shuttle valve piston was inserted pretty far... probably past center. Using needle nose pliers I pulled the shuttle valve piston out. Then I tried again to push fluid from MC into the block. After some pushes, the shuttle valve cylinder filled with fluid - this convinced me they are indeed interconnected.... how else can I get fluid in the shuttle valve cylinder with my setup?
So, I decided I needed to close the shuttle valve chamber back off so I can build pressure. I put the cap on and snugged that down, but left the piston out. This sealed up the shuttle valve chamber. This allowed me to fill the block completely (I capped the forward brake ports too) and get pressure everywhere inside except the rear brake outlet.
With that done, I pushed a few times and got some resistance, then, bam - fluid shot out the rear brake outlet port. Something in that port, or in the prop valve/chamber was plugged up, and i had finally gotten enough pressure in the right direction to clear it out.
From there, I topped off both MC chambers with fresh fluid, removed the shuttle valve cylinder cap and put the shuttle valve piston back in "just enough" to get the cap on, installed the front brake chamber line between MC and distribution block, and sealed up the MC lid. To put it in the car, I was able to work the assembled MC + dist block (with fluid) around behind the export brace and get both the distro block and MC onto their bolt holes. Two nuts on the MC and 2 on the dist block thru the sidewall of the engine compartment and it was in place.
I connected up the rest of the brake lines (being very patient with the 1/32 to 1/16th wrench turns allowed by the tight quarters in this space, all while interlacing my arms around the hood hinge.)
From there we bled the lines, RR, LR, RF, LF in that order.. Getting tons of air out of the RR line before fluid. Low and behold the brake light indicator on the dash went out (right after we first applied some pedal pressure) and never came back on. After the full bleed we had solid pedal, and, for the first time in a long time I think, the rear brakes on this car are working again.
Long road, and it was one of the messiest jobs I have done in a while... At one point I pushed the MC out of the vice and spilled all that fluid, and during brake bleed, I decided I needed to spill the jar I was collecting fluid in too. But all in all - it was worth the effort to get everything working right again. And now I have confidence in the system - which is really important.
Thank so much for all the help everyone. I don't think I could get there (or I don't know how long it might take) if I didn't have this resource to lean on!
Jay