have problem with rear brakes on 03 grizz,brake pedal goes soft all on its own if you look at rear caliper pads on front side of caliper have moved away from piston,need to pump brakes to get hard pedal again,this happens over and over again.

 

Sounds like you have air in the hydraulic line. You better check to see if you have a fluid leak, be sure your brake fluid reservoir is topped off and you will probably have to bleed the system to get the air out. Also make sure the brake control on the left handlebar lever (also linked to the back brake) is not hanging up or sticking (however this is probably not the case since you said the brake pad was not touching the disc)...

 

i've rebuilt master cyl bled brakes over and over something is making pistons retract in caliper.

 

Check the runout on the disk itself. Could be there is enough so that it is pushing the slave piston back far enough so that brake feels soft. Either that or the drive shaft is moving axially. Check end play in drive shaft.

 

Yes, I would also guess the rotor is not running straight. I had the same problem on the front of my Z, the rotor was bent.

 

Theres nothing to make the pad retract. It sounds like the slider pin of the caliper is froze. The caliper needs to float on the mounting, to center up the caliper on the diak. If one pad is not making contact with the disk, and you can see that, id say the caliper slider is rusted and wont slide anymore.
When the caliper and mount are off the disk..can you move the caliper separetly from the mount? It should take some effort, but it needs to be able to center up on its own on the disk.