The slave cylinder is the problem area. Get under the car and pull the boot back from the slave. If there's fluid inside, it's time to replace/rebuild.
Those dents are drains, if memory serves. Put the jack stand perpendicular to the seam.
Konis work well with stock springs. I can't comment on the STR.ts as I've never tried those. The drilling isn't a big deal and alignment is not critical - there's rubber in the system to take care of that. A 1/2" hole should work fine. I suspect that's what most people actually use.

