When you pull your brake lever, fluid pressure forces the pads against the rotor causing the friction needed to stop. When you release the lever, the pressure stops but you would imagine the pads could stay in contact with the rotor and this could cause unwanted friction, noise and heat.
To stop this from happening, the piston seals are designed to retract the pads a bit on release, creating a gap to allow free rotation.
The next time you pull the lever, the initial travel you feel is closing the gap to bring the pads in contact with the rotor. Once the gap is closed, the lever feels solid and braking should be as usual. If it's not, then you most likey have air in the system. This is a mushy brake.
The amount of retraction depends on the design of the seals. When everything is brand new, the gap is small. As the pads wear, they should get advanced closer to the rotor, but are limited by the retraction properties of the seal. The seals can also stick and make the gap bigger.
Clearly, Nissins seal design retracts the pads further than other designs and what most people are used to. Not having the brakes function as expected can be a problem. However, it doesn't seem to affect the absolute stopping power of the bike.
By manually pressing the pads back, you break this sticking effect and bring the pad closer to the rotor. This degrades as the pads wear and don't advance close enough to the rotor, and you have to repeat. This is why guys with 200 miles on the S3's don't have an issue, they have no pad wear yet.
The point of all this is to understand that the seal retraction/sticking seems to be the issue with the Nissin brakes. Not to be confused with Mushy/spongey brakes that have air.
Now, should Nissin be pressured to change the seal design and swap them. I believe so.