I guess you haven't read the Brake FAQ. There is a caliper rebuild walk through there.
In it, it explains the use of dow corning vacuum grease to coat all metal parts behind the friction pad.
Water can still get in but the silicone grease just sheds it, preventing corrosion damage to caliper piston, friction pad backing.
The grease is rather sticky and holds the nylon ring in place easily.
The brake arm spring retracts the fixed pad .006 inch. The square section seal in the caliper pulls the piston back. Grease adhesion keeps the pad in contact with ring and piston. And, any contact with the rotor would just knock the pad back into the caliper bore. You should have dry assembled the piston and pad into the caliper without the seal to ensure both can move freely in the caliper bore.
Also, the seal groove should be cleaned thoroughly while using an inspection mirror. Distorting the seal shape with crusty bits or piston corrosion pits, hinder the seal retraction capability.
The stock brake system can be bled without ever cracking the caliper bleeder. In stock form, the master cylinder bleed hole is the high point of the fluid system and all the air will seek the highest point. The low bar/clubman type master cylinder mounting often prevents the master cylinder relief hole from being the high point, and makes bleeding the system problematic. The stock system/arrangement will bleed itself overnight.
Rubber lines fatigue with flexure and it also loses its shape memory over time.
Ever stretched a brand new rubber band? The first stretch was the hardest, right? Subsequent stretching was easier. Same thing happens to rubber lines, even though they have braided fibers embedded. Even if the brake lines expand just a little, it consumes more volume from master to fill it, and higher pressures just stretch it more. This pressure is therefore diverted from the friction pad to rotor pressure.
Being the first production disk brakes on a motorcycle, the lever function was designed to mimic a drum brake, and NOT allow the front tire to be locked. Newer bikes with far more tire contact can have a stronger braking system, and people have been trained to use it without locking up the front tire. Trust me, you don't want to lock up the front tire.
The stock system components with SS lines will allow you to squall the front tire, if you use your whole hand to apply pressure to the lever.
Cheers,