I may be wrong or wronger, but I adjust mine to grip ASAP if the peddle is pushed since I NEVER use it unless its a total panic situation (see my recent thread about my hydro handle going around like a roulette wheel... cub vs. TJ/house/whatever damage, TJ/house/whatever wins every time if I get a choice). I'm not outrunning neutral, but mine are adjusted CLOSE. If you mess it up you'll know right away because the hydro will whine with the brake depressed or the pads will drag. Put the rear up on a jack and spin the wheels by hand to make sure the pads are free.
Yes, its totally possible your linings are toast and that they need replaced, but you should be able to adjust them all the way down to nearly (or all the way... never tried) metal on metal if you want. There are procedures to replace the linings, but sadly you can't just buy new pads like you can for a car. NLA.
As plenty of others have said, you should practically NEVER need to use the brakes on hydro tractor. If it's not stopping under reverse load, it ain't gonna stop anyhow because you're out of traction. I experience this every single time I mow my hill and duals aren't practical for the rest of my property so we go down fast and up slower.
