Good call on the rim strips. When I deinstalled the stock strips I could see where the spoke holes left an impression on the strip and some of them indicated that a few holes were partially exposed.

I had a chance to sand down the brake pads, and you're right! There really isn't any problem with the braking system. They work fine as long as you break them in and adjust everything properly (which I hadn't done due to my lack of experience with these types of bikes).

That being said I had a pair of Kool Stop dura type holders and pads come in today that I can test out later this week.