Arm should be able to fully retract, although do get rid of any cable slack with the barrel adjuster, then use the pad adjusters to get pads nice and close to rotor, bite should be nice and soon. As for bedding in its good to do so purposefully, with freshly sanded or new pads and rotors go really fast then brake really hard without quite stopping or locking up the wheel (weight back helps) a fair few times for each brake.
I’ve ended up adjusting the lever reach screw in the 105 shifters which has improved the bite point significantly- pads still need bedding in but feels a lot better now.
Arm should be able to fully retract, although do get rid of any cable slack with the barrel adjuster, then use the pad adjusters to get pads nice and close to rotor, bite should be nice and soon. As for bedding in its good to do so purposefully, with freshly sanded or new pads and rotors go really fast then brake really hard without quite stopping or locking up the wheel (weight back helps) a fair few times for each brake.