I had the same problem. The solution was the brake pad on the swinginging arm side is not located properley. The pad was trapped behind the holder slightley. Look closely and you will see it. i was able to free it with a screw driver by levering it up slightley without having to take the brakes apart again. 3 or 4 squeezes of the brake lever and everything was as it should be. Hope this helps.
Jeff Cooper ( Lord Petersham ), June 2009