I think the key here may be your statement "all was good the first 500 miles or so"....
Obviously, the pads didn't get thicker after 500 miles, so something else must be happening. The piston could be binding, the new pad could be binding in the caliper, or the recouperation hole in the master cylinder could be blocked, preventing proper retraction of the piston.
With the "caliper set bolts" tight, and the arm "stopper bolt" backed off, can you apply pressure to the piston side of the caliper (with your knee, for example), pressing it toward the disc, and create a gap with relative ease?
There will always be some a minor amound of drag between the pads and disc....when you say binding, is it a significant amount?