No the engine must not run for this. I've struggled a lot with this some time ago... your procedure must work as well but u have to do it too many times and with new cylinders. If the master and slave cylinders are old u might not succede. Best way is the one from RAVE >
Bleeding
1. Top up reservoir.
2. Raise the front of the vehicle.
3. Connect tube to bleed screw on clutch slave
cylinder and submerge free end in a clear
container containing brake fluid.(u better put a funnel in the free end, fill it with fluid and keep it high)
4. Loosen bleed screw, then apply steady
pressure to the clutch pedal, depressing it
through its full stroke. Allow the pedal to return
unassisted.
5. Repeat the procedure until a flow of clean, air-free
fluid is purged into the container.
6. Hold the pedal to the floor and tighten the
clutch bleed screw to 9 Nm (7 lbf.ft).
7. Check and top up reservoir.
CAUTION: Never re-use fluid that has been
bled from the system.
8. Remove stands and lower the vehicle.
And u have to do it with patience for quite long time(e.g. 20-30mins.). If no joy replace the cylinders.
After this procedure take a piece of wood or something and stick it between the pedal and the seat to keep the pedal fully depressed and leave it over night.... it's been verifyed by me ... i've learned it from a m8 on D2boysclub.... it's brilliant.