I just installed KVR's (www.kvrperformance.com) slotted rotors and their carbon fiber pads on my 88. I also installed the stainless steel brake lines from the Fiero store. I can't believe what a difference this has made! I can actually stop now!

I am really looking forward to autocross season!
I also encountered the mushy brake pedal problem, but found that the rear pads were not touching the rotor at rest. It took three or four pedal depressions to make contact. The solution was to apply the parking brake a few times. That caused the caliper to squeeze the pads to the proper position.
Anyways, it is definitely a huge improvement over stock!
------------------
1988 Fiero 3400DOHC