Picture of what came out. The locating screw in the brake pad for the caliper side backed out, eventually far enough it jammed up in the caliper body preventing the pad from retracting. New pads I removed the screw entirely and reinstalled with a dab of blue loctite. I will use a dab of loctite on every brake pad locating screw in the future.
I also cleaned the caliper in the ultrasonic, and went over the groove for the pad locating screw with a file and then sandpaper as it was marred from the screw backing out. Master cylinder was ultrasonic cleaned and honed with a 14mm dingle berry brush. Distribution block on lower triple also went in ultrasonic and thoroughly flushed.
"Old" brake fluid from recent change came out clear but with some black particulates in it. Surely from deteriorating brake lines, though they looked pretty good inside (aside from the sediment buildup which was not black).
New braided lines installed. MC rebuilt with K&L kit. MC was painted with Dupliacolor caliper paint, baked for over an hour at 200*. Disappointed in the paint durability, as I have a chip from lightly hitting it with a wrench when tightening the lever bolt. I'll touch it up with a small brush and it'll hardly be noticeable, but i suspect the paint will chip from bug impacts let alone the occasional stone or road grit. Whatever, it's a daily rider that sees rain regularly and occasional snow, but disappointing when you try to make it nice and it appears to be a wasted effort.
New brake lever and pivot bolt installed with brake grease. Brake feels very good now, smooth, easy, and progressive. Rotor was scorched to hell after the sticking. I scuffed it all around with sandpaper to break the glaze which significantly lightened the discoloration. New pads installed, cheapest pads looked softest and least metallic. New piston o-ring, same nearly new phenolic piston I used last time. Same anti-squeal shim pads. On a short test ride the brake began squealing again after a few stops, though not as loud as before when it was sticking. No hard stops, all fairly light to somewhat moderate braking effort. I did not shim the caliper for up/down movement, though comparing to my K1 with silent front brake the K1 caliper has massive up/down movement compared to this one. Because of that I am doubtful that up/down slop in the caliper arm plays any significant role in brake squeal. At least my daily rider is back on the road and the brake works good.