I bought a pair of pre-bled Avid Juicy 3.5 brakes from an ebay parts store. I asked a guy at my local bike shop about the red spacers, and he said they should come right out easily by pulling (the rear brake spacer came out just fine). I attached the front brake to the fork and tried to take the red plastic spacer out, but the thing wouldn't budge. It took robo-grips and a screwdriver to finally pry it out. I put the front wheel on, and the space between the break pads leave ample room for the rotor to fit with space on either side.

The Main Problem:
Now that the front brake is installed, it seems that it is seized up. I can squeeze the lever only about a centimeter before it stops, and the pistons will not close or even move at all.

Have I done something wrong with my installation, or is there something wrong with the product?