Pad wear is down to 2 mm, so the notch that's almost worn all the way through should be about the limit. Backing plate is supposed to 4.5, so 2 + 4.5 puts you really close to your measured 7 mm.

Compare the inboard pad to the outboard pad. Are they worn about the same, or was one side much thicker or thinner? If they were close, then the caliper was probably working okay and is less likely to be seized but only difficult to push back in.

Clamp the outboard piston in place. Expect it to retract/compress almost flush with the caliper. Once that is clamped, then squeeze the other side hard. Put an old pad in there and use a clamp. Try to compress from the center, not from the edges.

There's no evidence of grease on the slides and your pad is worn nearly to the limit. That may explain the squeaking. You've also got a LOT of crud in there and it'll be difficult to fit the new pads into the caliper until it's scraped out of the corners.

Pedal feel is subjective. If the piston is really seized, then yeah, it could explain a soft pedal and harder braking since you'd only be pushing on one side of the rotor, but for that to be the case I'd expect significant difference in pad wear between inboard and outboard so you'll need to compare them to help determine that.

Since the caliper is off, you might as well inspect the rotor for thickness, warping, etc. Consider replacing the hoses since they're undone as well.