2 ways you can do this. Sounds like you have a ton of air in the sytem or the wrong part. When the master cyl fails you get the same thing going on (half pedal).
1. open the bleeder screw and alow gravity to bleed the system. After that is done for about 10 min or so. Grab a friend have them pump the pedal hold it down. Open and close the bleeder before they let go. Do this till the pedal comes back to normal.
2. Pressure bleeders are nice! you can find one from any of the major tool supply stores.
Basically there is a dead spot in the upper travel correct?
You need to try and pump the pedal then hold. What i have had to do is fill the reservoir to the top and pump rapidly about 100 times as fast as you can. this will force any air upwards. You should start to feel pressure after the 4th time bleeding if not then you may have a bad master cyl.
-Adrian
BMW Technician
5 years BMW master