Did you clear the tiny bleed hole in the master cylinder? Have you primed the master cylinder?
Do you have a mity vac, to suck the fluid from the master to the caliper via the bleed nipple?
Hey Two Tired...if prime it you mean put some brake fluid in the reservoir than yes I did. If not, you're gonna have to explain it to me better because I really don't see where I can prime it. I don't have a mity vac, I'm thinking that I'm gonna have to spring for a more expensive bleed kit. Most bleed kits I see have a pump of some kind, mine doesn't, it's just a bottle and a tube.
No priming a pump means getting fluid on both sides of the pump check valve(s). The master is, in effect, a pump.
I will ask some fundamental questions:
Does your bleeder kit apply any sort of suction to the bleeder nipple? (I use the Mity vac (hand help vacuum pump) for this.
Are you opening the bleeder nipple/valve while you are trying to bleed the system?
Are you certain that the master's actuating piston is fully retracted when the brake lever is up?
Did you assemble the master's piston cups in the correct order, and did you place the one with the hole in the center approximately midpoint on the piston shaft?
See:
http://www.westernhillshondayamaha.com/fiche_section_detail.asp?section=2037015&category=Motorcycles&make=HONDA&year=1978&fveh=123330The pic below is exemplary for showing internal parts orientation (particularly the center cup), even though it is actually a Cb550 Master piston.