Car has 126,000 miles. Had to drive it a few miles and im pretty confident either the clutch or flywheel is damaged. I was looking at the possibility of the the slave cylinder or master cylinder being the cause of it. I recall seeing Something about the one of the cylinders will stop working correctly if the clutch pads get worn down enough.
At this mileage, the clutch could have worn out for sure and started slipping. But in general, in auto adjusting clutches, the engagement point doesn't go too low as you mentioned even if they are worn out, unlike in the manual adjustment type as the auto adjustment maintains the bite point closer to the normal position. And more over, the clutch pedal becomes harder to press the more it wears out.
So its always safe to check both the master and slave cylinders before replacing with a new clutch. And make sure to replace the clutch release bearing too, even if it in good condition.
And after replacing the clutch, you may need to adjust either or both the CMC and CSC for getting a smooth shifting and also the original clutch engagement point. But do that only after checking how the new clutch feels after replacement.
When I'd to replace the clutch in my car a few years ago, which I did at a much lower mileage, I machined my flywheel and changed only the clutch and pressure plate along with a new release bearing. Its still doing good.
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