Want a tutorial for bath bleeding? Look in my signature.
As above - undo the hose fitting a little bit. That's not in my guide because I made it before those brakes came out.
I think it would be worth offering up the brake + adaptor to it. From that picture I suspect using an adaptor it might foul on the chainstay, so it wouldn't work.
I don't think these frames work with BB7s at all.
How are you putting in pedals to kill the threads? They don't need doing up particularly tight unless you pedal backwards a lot. They're made to do up when you pedal forwards.
It's possible to hammer them back up but it's very difficult. You have to beat the points of the star away from the steerer. I managed to do it in a pair of echo forks but it took AGES. Seriously ages.
I beat it so much it ended up turning around inside the steerer tube and it came out looking pretty unusable.