The stock braking system is very good, it just doesn't give sensitive feedback. Braided lines will fix that. Changing the pads without changing the lines will give you more braking without helping the feedback problem, a bad combination IMO.
Start with the lines, you will get the most improvement out of them. The stock pads are quite good. You will discover how well the brakes are on this bike, just by changing lines.
Then when the stock pads need replacing, go ahead and get better performing pads.
As for dive, it has nothing to do with changing brakes or lines. And no, you should not use preload and damping to fix a dive problem, as that is not what these adjustments are designed to do.
To decrease fork dive, you have two options:
- Slightly increase the oil level in the forks. (as little as 1 ounce will make a noticeable improvement)
- Re-spring the forks. (a more expensive solution, but the better of the two)
Preload should be used to set the sag. The sag should be set somewhere in the 35-45mm range depending on how stiff a ride you desire.
Damping then should be adjusted so that the suspension moves up and down over bumps, but does not continue to move up and down after the bump. Most riders set this one by how the ride feels. Some suspension experts shoot for one oscillation after a bump, for a smooth ride, I like mine slightly stiffer than that for exceptional cornering.
FWIW the peload and damping settings from the factory are to high, making the bike ride harsh.