Well TT, I'd like to say I did use varsol when I cleaned initially, but I did manage to get to the point where I found out about the alcohol thing. So that's what I used.
What I didn't do correctly, for sure, was use the proper grease in the puck(s) area.
I also don't really have a feel for how clean (and how to clean) the inside of the master cylinder resevoir. A real fine grit sandpaper, or what?
I'm just on my way out to Canadian Tire to get some of the Teflon stuff recommended by hcritz for cleaning out the cylinder piston. I'll drain, clean, refil and bleed again and see what the brake Gods are up to with me after that.
Another positive is that, despite periodic and somewhat intense frustration, I'm learning. Also, if not for these current problems with the caliper piston not retracting, I wouldn't have learned about using a proper grease (or the reasons for using grease in that spot) for the pad pucks.
Yeah, I'd like to be able to not only fix the problem, but to know what the heck it was I did specifically, to fix it.
Also, one thing I didn't mention (because at first I didn't think it was related or relevant) - the moving pad was wedged at an angle when I first took the caliper apart. It was one of those that needed filing to fit properly into the caliper. I removed it, reduced it a bit more, and when I replaced it, it seemed to be fine - no more tendency to wedge. I reassembled everything as per Two Tired's instructions (on another post) except for the grease - I used the Syl - Crap stuff. It worked great at first, but then quickly went back to it's default - no retraction mode. The puck has stayed straight, however.
I'm tempted to do just one thing at a time, so that I know what it is I do IF I manage to get it working properly.
Conceptually now - I'm in this spot - keep working at getting the DOT 5 working (since there's so much informed opinion regarding the likely futility of simply compounding the problem further by returning to DOT 3.
First I'll put some proper grease around the pucks and try again.
If that doesn't do it I'll drain, pop the caliper piston, clean the seal groove again (brass brush on a Dremmel), and have a good close look at the o-ring. If the o-ring is swollen I'll abort the DOT 5 route, strip the whole works off the bike, clean it, clean it and then reinstall with DOT 3.
If the o-ring is good I'll put it back together, then fill and bleed. If that doesn't work, I'll drain the master cylinder and try the Teflon stuff, refill, bleed and see what I see.
After that I'm not sure there's anything else to do on the DOT 5 front, so I'll go the change back route.
I'm open to suggestions though.
