The aluminum block below the master cylinder is the combination valve. It actually has two functions. There's a proportioning valve that reduces the pressure to the rears after a certain "knee" point. This is to keep the rears from locking up under hard braking, where the weight shifts towards the front of the car. There's also a "shuttle" valve. Its purpose is for safety. If either the front or rear hydraulics were to fail, the piston inside the shuttle valve gets pushed to the failed side, closing it off. This allows the good end to still function. If the shuttle valve ever gets activated, you're supposed to see the "Brake" warning light on the dash, assuming the bulb is still good after all these years.
The 10" brakes that came on the '85s are awfully small. They're good for retrieving groceries, but not much for performance applications. The running joke to explain why Ford finally went to 11" brakes on the '87-'93 models was that they finally exhausted their excess stock of Pinto brakes. Nevertheless, there's nothing that says you HAVE to upgrade. You should be able to get the existing brakes to at least work like they were designed.
When you say that they stick, do you mean that one end is locking up prematurely? Or are they touchy where they are difficult to control under hard braking? What condition are your tires in? If they're bald, or if you've flat spotted them, it may not matter what brakes you have. You're still going to be limited by the tire grip.
If you're just ichin' to upgrade, there are numerous options. For a street driven car with an occasional open track even, the SN95 Cobra are a good option. The trouble is, it's a bit of a slippery slope. They require going to 5-lug wheels. By the time you've installed new brakes, wheels and tires, you can easily exceed $3000. On the low end, you can go to the '87-'93 brakes by just changing the spindles, rotors and calipers. If you want, you can skip the 66mm GT calipers and use the 73mm SVO/LSC calipers. The trouble with that is you'll probably need to go to the 1 1/8" master cylinder. Most people find the brakes too touchy with the smaller stock master cylinder and big bore calipers.
If you can't tell, I've gone through several brake setups on my '86. I better stop now... | 
