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Pads are rubbing on the disc at all times.
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If you are talking about a tiny drag, this in normal. Not sure exactly which brakes you installed, but disk brakes do not have a "return" spring (unlike drums)They work because of the square profile of the O-ring. When you put on the brakes, it slightly distorts to O-ring, and when you release the brakes, the O-ring returns to normal shape and very relieves the pressure on the pad. Basically, you won't really see the motion. When driving, the small amount of friction generated will expand the disk, and push the pads back a tiny bit further. One point, if the disks are not properly flat you will get a pulsing effect on the brake pedal, and more drag.
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Brakes are no improvement on Drums. Has anyone had experience with disc brakes ?
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Braking is a rather complicated subject, however maximum braking is related to the friction coefficient between the tire and the road. Now the brakes need to be able to control the braking action sufficiently well to allow the tires to reach this point with out skidding, when they loose most of their traction. As has already been pointed out, the main advantage of disk brakes is that they are more resistant to heating and subsequent brake fade.
The front brakes provide a larger portion of braking power for two reasons 1, the weight of the engine up front results in greater traction while breaking 2. weight transfer caused by breaking further increases the percentage of weight (traction generated) by the front wheels. Therefore, they need to dissipate more heat, hence the reason for large drums up front or disks up front.
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If so can they work with the original master cylinder arrangement? I would appreciate any help anyone can give me on this one.
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In theory yes, and brake line pressure should be about the same. A few concerns, the disk brakes may have a larger quantity of brake fluid, and may therefore need a larger reservoir. It sounds like you already have a later model dual circuit master cyl installed? This probably has a larger reservoir than the original. The dual circuit is a safety feature so that in the event of a leak at least 1/2 the brakes remain. The hydraulic pressure when braking should be the same.
Balance between front/ rear brakes, some cars spec different diameter rear brake cylinders with disk brakes. This certainly could affect the braking ability of the car. Also see if there is simple mechanical wear in the mechanism between the brake pedal and the master cyl. This could take up a large percentage of the pedal travel and subsequent braking applied.
Yisrael