That's not my point, if the fault reoccurs when at high speed or in heavy traffic it could be a real issue. I have seen someone's brake fail to work and also suddenly jam full on, in both cases they were lucky.
The OP didn't have a fault during use, apart from suspected excessive lever travel.
His problem is that the piston popped out during maintenance (a facepalm moment that most people who learn by "having a go" can probably sympathise with). I'm assuming that the wheel wasn't fitted at this time as the rotor would prevent the piston coming out past the seal?
It sounds as if the seal has moved and is preventing the piston from going back in fully.
I would have thought a process similar to the following will sort his problem:
1. Relocate the seal correctly (after checking the seal for possible damage)
2. Insert the piston carefully, ensuring it goes fully back.
3. Clean off any brake fluid to prevent contamination of pads/rotor.
4. Fit pads.
5. Refit the wheel so that rotor prevents Pistons travelling too far.
6. Bleed the calliper
7. Check for leaks.
8. Check lever travel.
Once he's ensured there are no leaks, and that the pads grip the rotor sufficiently to stop the wheel when the lever is squeezed - I'm struggling to see where the danger lies?
Graham
P.S. To the OP, good on you for having a go.