Make mine another vote for the master cylinder. It sounds like the MC is allowing passage of the fluid past the piston seals when hard pressure is applied. In your case the leak is not to the outside world but rather between the chambers in the MC. Ergo, you cannot see the leak but it’s there inside the unit.
Regarding the ABS, the light should NOT illuminate if the system is acting properly. The ABS light is there to warn you of a problem detected with the ABS system and only for that purpose.
Regarding the squeal, what you described a typical symptom set of wear indicators telling you the pads are low. It sounds like the shop fixed it when they changed the pads and resurfaced the rotors. Correct me if I’m misunderstanding your statements.
The ABS should not cause the pedal to drop. The ABS system introduces a solenoid-operated valve in the middle of each brake’s hydraulic line. When the wheel speed sensors detect that one wheel has stopped spinning consistently with the others it assumes the wheel has lost traction and stopped spinning, and the computer sends a squarewave to that brake’s solenoid-operated valve. That interferes with the hydraulic pressure and makes the brake pulsate rapidly, which can be felt in the pedal and often heard as a really horrible sound that scares the living bejesus out of most drivers unfamiliar with the sound. In this case, it’s the MC that I suspect is allowing the pedal to drop, totally irrespective of the ABS operation. The real connection here is that both are happening under hard braking for separate reasons, but making them seem related.