I did replace the calipers and lines years ago with stainless steel ones from Vette Brakes & Products. The calipers & lines are not leaking now. However, I didn’t engage the brakes when I started her up. The brake fluid probably had 10 miles of use before I stopped driving it. Does brake fluid naturally degrade over time just sitting in the master cylinder and lines?

Moisture tends to get into brake systems -- DOT3 is alcohol based and absorbs the moisture, most of the others will not absorb it, so the moisture will lay in the system; neither option is ideal.

Brake fluid can also dry out over a long period of time, leaving a residue in the system.

Your best option, as someone else suggested is to purge out the old fluid replacing it with fresh.

Exactly Jim.

On any of my restorations, whether it be auto, truck, or bike, I go through the brake system first.

Steve

As has been said, I'd use the old pads to clean the rotors of rust and then replace them.  I wouldn't mind betting that it will not take much to clean the rotors.

But I would change the brake fluid, getting as much (or all if possible) of the old stuff out.  

I have never got involved in building callipers - my wife and I have done pretty much everything on our '78 in the 34 years we've owned it, but I let professionals build such a vital part!   But we have changed callipers.  I have had a recent discussion with a friend about the merits of O-rings over the lip seal design and I'm afraid I do not agree with Duntov's take on the O-rings.   

Our car gets driven at least once a month, even in the winter on nice days, usually 100 miles or so to "warm everything through", and in "the season" we'll also do various trips both locally and long distance (2000+ miles). When we had the old lip seal callipers it was necessary to bleed the brakes each year to maintain a firm pedal.    About 15 years ago I eventually replaced all 4 callipers with O-ring examples and that need was eliminated, the pedal staying firm for years.   I have now reverted to a routine bleed each year, just to keep the fluid fresh, but no air enters as it did with the lip seals.

I have stayed with DOT4 fluid, which is compatible with what the came with and I see no advantage in going to DOT5.1

What I would add is that clearly, braking performance on a modern cars can be incredible, but our C3s are now at least 42 years old and compared to other cars of the era, the brakes are, or should be, bloomin' good!