K-H brake swap done, but doesnt stop!

Did you install an adjustable push rod that has a fat heim joint that attaches to the brake pedal? I had the same problem as you and after a lot of screwing around found the heim joint was binding against the brake pedal and wouldn't allow full travel of the pedal. A little grinding on both the pedal and heim joint removed the interferance and the brakes work just fine now. My set up is manual with dual resevoir master with 15/16 bore. Not KH though, just 73-76 Mopar.
By the way, it doesn't seem unusual to me for just one piston to move when testing the caliper. It just happens to be the one that over came friction first and then just kept moving with reduced friction.