And the braking system has been bled so you are certain there is no air in the system?
Although I have never needed to do it, have you tried reverse bleeding (queue Fire-medic to explain)?
Is a new seal fitted to the piston in the master and in the correct orientation?
Note sanding the bore enlarges it so reduces the sealing efficiency, you would need to measure the diameter of the bore but I'm guessing the amounts 400, 600 grade paper is removing is not significant but depends on how much sanding is done.