Free play in the brake is required to keep the brake from dragging and over heating. Free play can be minimal but make sure you still have some slack after the fluid has heated up (fluid expands when warm). The fluid reservoir cap will tell you what fluid to use in the system (dot 3, dot 4, dot 5). Do not use anything but the recommended fluid (higher number is not an upgrade). Use a high temp powersports brake fluid and not an auto parts store brand. It does sound to me like your disc is glazed over though.