Help me stop!

Well That right there tells the story!
-That valve in the pic is just a brake warning sw. It has a shuttle valve inside that moves towards the side that has lost fluid pressure, thus turning on the light. Fluid is not supposed to migrate from one side to the other.If it does, the o-rings are shot.
-The caliper is large enough to do a great job
-The one worn pad is a symptom of a caliper not sliding on the slider ways or pistons stuck in their bores, depending on which side is the more worn.In your case, the outer pad is the stationary pad. Since its worn the most, it must be dragging continuously. The other side not being as worn, indicates that the piston-seals are retracting and allowing the pad to retract. So the question remains; what is preventing the stationary side from retracting? This is usually because the caliper is not sliding on the slider ways. or slider pins. Check it out, and fix it.
-Now if the caliper is dragging; it will heat up the rotor, and bake/glaze up the pad, possibly to the point of no longer providing any braking force. Since you said the car stops straight, that means the caliper on the other side must be doing the same thing. So, in effect 50% of your stopping ability may be gone

-Fix the sticking calipers, replace the pads, consider machining the rotors, problem solved.

-BTW; With the sizes of the various hydraulic, and mechanical, parts that you have, there is no real deficiency. Your brakes should be adequate for street duty.