I am moving this subject to another thread to keep it from being lost in the XM-3500 thread (which is too long). First, I want to thank Henry42 for finding this originally and here is a quote from his post in the XM-3500 thread as well as his original picture;
2. The rear brake is not mounted properly, only about 50% - 75% of the pad touches the disk. The front brake is mounted properly.
Here are images for what I did today to fix the rear brake pad alignment. A few quick tips;
1) Be careful what you do to grind the frame since the brake disc is near by (I had no problems but just an FYI). Same goes for slotting the lower mount hole.
2) Use masking tape to mask off the disc and area around here since there will be metal filings.
3) I used Rust Oleum black paint to covet the bear metal.
The rear brake caliper chatter/noise is gone!!!!! The caliper assembly is sitting much nicer and solid now and the bike doesn't make any noises at low RPMs...hopefully Mountain Chen sees this and gets this revision into the XM-3500LI design.