How to replace Avid BB7 brake pads in "new" calipers?
There is a trick: The pads need some "persuasion" to get past the spring clip.  Here is a side view of the pads and the spring clip showing how the pads nest within the steel clip.  This should make obvious why a little force is required to get the pads to move fully into the caliper.



After much frustration, I finally looked at the pad and the clip in that side view and realized that the "ears" on the top of the pad need to be forced (gently) past the narrow, re-entrant part of the cap (expanding the cap outward as they pass).  The force required was more than my fingers could muster, and more than was implied by the instructions I found on an Avid site and elsewhere.

The way I applied the necessary force was by setting a drive pin across the edges of both partially installed pads at their bottom (next to the bottom "ears") and giving the drive a light tap with a plastic or rubber mallet. The pads moved ever so slightly as the ears pushed past the re-entrant portion of the steel cap. A piece of wood or a dowel of the right dimension would be better, and a steel hammer would work fine. No matter what you use, be gentle.