That caliper is pretty rough man, don't skimp on front brakes, I'd recommend at least a rebuild consisting of all seals and both pistons. Personally I'd be looking for a clean replacement.
The sides of those rusted out pistons need to be a very precision fit, even if you remove the rust they're pitted beyond help. There is a good chance your rotor is damaged too, look into it.
Don't risk anything when it comes to front brakes.
What he said.
Do it like this -
Pull the pistons both out, they are both fucked. Get them out by whatever means necessary. The best way is put the caliper back on, bleed it, and use hydraulic pressure to force both as far as possible. If you can't do this or don't want to, then just grab them with molegrips (vise grips) and pull, twisting and turning, til they come out. Sometimes that does work, sometimes not. Otherwise get a large rawlplug, turn it until it expands and locks in the piston, then stick that in a vice and twist and tug.
Replace with stainless pistons, like this:
http://www.wemoto.com/bikes/suzuki/gs_500_el_em/89-91/
It's going to cost you about £50, so it may be worth considering what upgrades you can use, or looking if a more modern Suzi uses the same caliper. Any used caliper from 1989 especially off a suzi is going to be fucked by now.
When you've got it all apart, give it a real thorough bath, and then use a toothbrush sized wire brush to clean out the seal grooves, dry thoroughly before fitting the new seals. Put it all back together using clean brake fluid for lube. Keep brake fluid off your skin, and if you don't trust yourself then wear goggles too, as it's really nasty shit.
With that done, you brakes will be much improved. That being a sliding caliper, I would also be looking if the sliding pins are in OK condition, and maybe replacing the boots and re packing with red grease (regular grease eats rubber). Also note the holes will go oval leaving the caliper wobbly if it's been run for any time without (enough) grease in there, and at that point there's nothing you can do but replace the bracket.
You are also going to need to derust and paint that pad guide pin, or the pads will grip on it and not operate correctly.
Dude, it has been a good while since I saw a caliper like that on a bike which was actually being used. It is scary, and I wouldn't put it back on without a serious clean. Here is a picture of a similar cailper on the back of my old T595, to show how clean the minimum reassembly standard really should be. If a piston is not perfect then it is a failure waiting to happen.
