Front wheel issue

[Dead Eye]

The piston can only retract so far

So you are saying that the pads are so thick that they are pressing on the caliper and not the piston when not under brake

Not quite - the pads are always is constant contact with both the piston and disc (under normal circumstances / operation)

The pressure in the hydraulic lines can't be relieved sufficiently (due to the valve at the master cylinder I believe) to cause a gap to occur. However, despite being in contact, its only very slight when the brakes aren't applied but its still enough to stop the wheel from free-spinning