Re: Lost My Brakes
Based on the heat issue and the smells you described I would venture to say you have a stuck piston in the caliper. If you spit out a brake pad (it does happen, believe it or not) you would have hyperextended the piston and that would cause your soft pedal. Likewise, leaking could cause this condition. The brake light on the dash was most likely triggered by the pressure differential switch which is an amazingly simple device that turns the light on if the pressure in one circuit of the brakes (rear in this case) is lower than the other (front).
I'm not sure how comfortable you are working on the bus yourself, but it all really is going to start with a good visual inspection. You need to get that wheel off and get a good look at what is going on back there. Is everything wet? Does the caliper look cocked or otherwise misaligned? Are the brake pads in decent condition? How do the rotors look? Take some pictures if nothing else.
For what it's worth, those brake parts aren't THAT expensive. Your rotors can most likely be machined. The pads are most likely cheap and widely available. The calipers might cost you some money, but that's only because of their shear size. I wouldn't mess around with rebuilding the calipers. Just get a remanufactured unit. By the time you get the seals, piston, etc you might well be paying more than for hte reman.