putting on new new front tires, I swear the larger wheel spacer was on the chain side, but factory manual states right side. Put it together as per the manual, and brakes back on, is it ok to feel some drag from the calipers?

 

Initially you'll feel a small amount of drag. Still, it should spin freely. Because nothing is ever perfect you'll generally end up with the rotors barely rubbing the pad once every revolution after applying the brakes a few times. More often than not you can't even feel it ... just hear it.