Seems to me that if you can see daylight between the pads and the rotor .. that's bad. The physics of the hydraulic brake system wouldn't normally cause that, so I'm wondering if your front brakes are working at all? When you pull the lever, the fluid (since it doesn't compress much) forces the piston to push the brake pad to the rotor. When you release the lever, the rotor "pushes" the pad and piston away, but in my experience that force is never enough to leave daylight between the pads and rotor. That "daylight" would mean you have extremely spongy and / or slow to respond front brakes... a non ideal situation if I ever heard it.
Long story short, time to open up the caliper and possibly the master cylinder.