How to fix motorcycle front brakes?

Hello! I have a 2001 Honda Shadow Ace (VT750CD). My brakes work but need new pads. The front wheel is already off from something else I was doing. The problem is that the caliper pistons are sticking out a little bit, maybe 1/4 inch. With the new pads installed, there isn't enough room for the rotor to go inbetween so I need to push the pistons in some but I can't just push them in. Is there a problem with the pistons? While I have everything removed, I might as well clean the caliper. Can someone please explain the steps?

Should I:
Unbolt caliper
Pump brake until pistons begin to come out more
Grip and remove pistons
Clean the bore and sand pistons
Put waterproof brake grease on pistons before installing again
Push them all the way in flush before installing new brake pads
?

Should I remove the dust seals/o-rings before cleaning the bore? Any help is very much appreciated.

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