The diagram actually calls for silicone grease, hence the grease gun emblem with the "S" in the middle of it pointing toward the guide pins. So you are correct in recommending dielectric grease which every brand I've used has been silicone based.
The only real difference in the 1/4 inch and the 6 inch tall reservoir is that the 6 inch will have a greater head of pressure than the 1/4 inch. But, for a brake pump, it doesn't really affect much since the compensator port closes when you actuate it; the reservoir isn't supplying a head of pressure to a pump. The main use of the reservoir is to serve as an expansion tank as the brake fluid heats up (from use or ambient temperature change), ensure there's enough fluid to fill the system as the pads and rotors wear, and to be able to check fluid levels.
Brake pedal/lever travel should remain the same as the pads wear. We're dealing with a hydraulic system that keeps itself filled as long as the reservoir has fluid in it. As the pads wear, the piston moves out to compensate and the system fills with more fluid from the reservoir to fill the space. It's always the same volume of fluid moved the same distance each time. If lever/pedal travel is changing significantly, you're getting air in the lines requiring you to compress it before the brake fluid is acted upon.
As for earlier talk of return springs, the piston seal acts as one in this type of brake system.