Front brake is NOT on, but pads touch the disc

Yes it will drag lightly. Think about it, there is nothing to make the pads move away from the rotor.

Hope this helps.

they will have a very slight drag on disc brakes. There is nothing that actually pushes the pads apart only the relaxing of the pressure applied. If there is nothing actually holding the brakes clamped shut< dirt on the caliper pins ,grooves on the brake pad pins, caliper piston sticking etc> that is the best you can hope for.

If there is a slight rub completely around the disc you can be rest assured that your disc isn't bent.

Its definitely normal, nothing at all to worry about.

Yeah except it locked up! This should never happen by itself (assuming you weren't tugging on the lever at the time).

I would check that the breather hole in the master cylinder LID is clear, quite often they get gunked up. Check the rubber is ok there too.

Also take the lever off & spin the wheel to see if it is any better. Some accessory pirate levers are not quite right & will leave the brake slightly on (blocking the return hole) but sounds like not the case.

Check slide pins ok. Sometimes the calliper pistons get a bit seized up & don’t want to move or return fully. Take the pads out & Pump them out a little, clean them & push them back.

You can carefully use a cheap wood sash or G clamp for this, but don’t go crazy. Sometimes the fluid picks up dust that becomes sludge & this falls to the bottom of the system. . . which is just behind the pistons. Often on an old bike I will remove them by pumping them out evenly & this gives you a good chance to clean the pistons properly & any gunk in the calliper + inspect the seals.