Front Brake Disc Swap Problem

My engine finally runs great thanks to the forum, but when I took the bike to get safetied, they told me my front rotor is too warped to pass. I haven't had any problems with it so it's a bit annoying, but can't fault the mechanic for being thorough I guess. Getting it replaced is now a time sensitive thing though because I don't want to have to pay for a second safety.

So I happened to find a disc for sale in town from an XS650 that is the right diameter, right bolt holes, right offset, it's just a little thicker than my old disc. I collapsed the cylinder in a bit and everything fits fine with my current brake pads which have a fair bit of life left in them, BUT if I put in new pads, the inside pad (the side that is stationary and isn't actuated by the cylinder) sticks out too far and I can't get the disc in. Any ideas out there for how I can get the new pads installed? Is it totally insane to just grind down a fresh brake pad about halfway so it fits? Do I just need to get wider calipers or a thinner disc?

Photos attached of the current partially worn pads with the new disc so you can see what kind of clearance I'm working with

 

Thanks tstidham, it did turn out the slide pin was just stuck. So I thought it was extended all the way out, but it had a bit more travel once I got it moving again. I think the rotors are different thicknesses because the one I got off the 650 was a rear disc. Maybe the front discs are the same between the 400 and 650? Either way, everything works now. Passed the safety, jumped through all the hoops to get the bike registered, just in time to put it away for the winter lol