Mechanical discs out in the world are almost always setup wrong, or do not work right. Start with the caliper floating.
1) Ditch the O-rings.
2) Set the inner pad all the way in so the brake is locked.
3) Have the lever arm almost fully extended.
4) Back out the inner pad adjustment four clicks.
5) Tighten the barrel adjuster by 5mm.
6) Strap-on the lever.
7) Tighten down the caliper.
8) Loosen the barrel adjuster to the point where it almost rubs.
9) Tighten the inside pad to where it almost rubs.