Brakes locking up.

I tried adjusting the pushrod coming out of the booster so it would be shorter. This seemed to help some. When I was taking the master cylinder on and off the mounting studs I noticed the piston is actually compressing when I put the master cylinder on (I can see the fluid swirl). When I have everything put back together with the cap off, I press the brake pedal and don't see the fluid swirl in the bowls.

Currently I have the pushrod adjusted as far back as I can. Would I need to space the master cylinder from the booster at this point? If I do, why would this adjustment not be set properly from the get go because the manufacturer asks for a 1/64" of air gap from the piston and pushrod; that seems hard to accomplish.