Some loss of engine speed is normal if you pump the pedal enough times. The engine has to replenish the vacuum in the booster. When it does that it pulls in some of the air from the booster that normally would have been pulled through and measure by the AMM. It's no big deal. All cars will do that if you try hard enough.

But just to ease your mind, to check for leaks in the booster turn the engine off. Wait a few minutes, then pump the brake pedal a few times. If the diaphragm and check valve are good, you should have enough vacuum stored in the booster for roughly 5 pumps. If the booster is shot you will not have any vacuum assist.

As for the light check the brake fluid resevoir and see if it is dropping. Also disconnect the wire from the brake balancing switch to confirm whether the brake warning light is coming on because of the brake switch or some other electrical fault.

Try a fast stop somewhere straight and quiet. Can you get four solid tire patches or does the car pull wildly to one side or spin out of control, careening down an enbankment?

The brake balance switch can be replaced if it is faulty, and will require another bleeding of course. A well-equipped shop would have brake pressure gauges they could hook up to all four wheels to see if there is a pressure imbalance that is responsible for activating the brake warning light.

I agree with Pete you have two different problems but somewhat related. Yes the booster is the most likly problem for the RPM drop. Check the one way valve for leaks or maybe the vacuum line going to it. As for the failure light the common problem is a sticking valve in the warning switch. I have had this problem before and did what many people said to do which is to start the car, then stomp on the brake pedal a few times to make the valve return via backpressure after hitting the brakes.. You have to stomp on the pedal fairly hard a few times. But please do not use both feet you might break something..I did mine twice and it returned to normal. If this does not fix it then do a search on this board for failure warning light, you will find several post on how to replace it or how to open it up and move the valve. You might want to bleed the brakes just to make sure but please follow the bleeding procedure for these brakes as there are 10 bleeder valves and they have to be done in order..Good luck... Max

You have two problems. One is the RPM drop is due to a faulty brake booster servo or check valve or leaking vacuum line to the servo(this is the large round canister connnected to the master cyl). The brake warning light is a separate problem and not connected (directly) to the rpm drop. The brake fluid distribution block which is below the driver side fenderwall is the location of the block where all the brake lines come together from the master cylinder. The light comes on if the pressure switch sees a differential pressure in any of the lines.
Oh another thing, does your car have the optional ABS brakes? If so, there may be a problem with the ABS unit, and it would be different than the above switch, but the system needs checking either way.
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'89 245 Sportwagon, '04 V70 2.5T Sportwagon