I don't think the block is there to defeat or prevent the SMC from actuating. As the wheel turns and the SMC grabs the disk, the arm it is mounted on pivots toward the front compressing that block. There would be considerable force placed against the rubber - look at that lever arm's length. If the SMC piston stuck in its bore, then this little rubber block would help push the arm back (toward the rear) and unlock the rear wheel.
Regardless, it doesn't belong there. You may end up replacing the SMC.
That would be my guess too - When the SMC fails it is often due to a lack of 'proper' servicing. This can result in crud and corrosion forming at the top end of the SMC - located inside the cylinder behind the securing plate and circlip. This is located behind the rubber boot - up at the top end of the bracket where the caliper bracket attaches to the fork leg.
This prevents the plunger from returning to its proper resting position when the brakes have been released - the result being that the back brake (which is activated by the movement of the SMC) remains on, and drags.
I would guess that the block of rubber was a crude attempt to stop the SMC from activating in the first place - by stopping the caliper from rocking forward when the front brake is applied. But the notion that a bit of rubber is enough to stop the massive forces created when those brake pads grab hold of the front disc rotor seems ridiculous. As SMSW said - it might be that it worked by giving the SMC a bit of a shove back once the brakes had been released.
Whatever - it is an indication of quite a serious problem which was developing when the rubber was put in. Who knows how bad the problem has now become - doubtless you would find out if it ever fell out, or disintegrated under the braking forces - but a rear wheel lock up is really not something that you want to happen.
When this problem first starts, the rear brake drags, and you may not notice it as the power of the engine will overcome the brake drag. But the disc gets hotter, and so does the caliper and the brake fluid. The SMC is not able to return to its resting state, so the pressure in the rear brake line is not able to be released, as it would be normally. The heat causes the pressure to build up and all of a sudden, the back wheel stops turning. The ABS cannot help you in this situation.
It would seem that the solution would be a new SMC (do not get the service kit as a cheaper alternative - often the problem is in the cylinder bore itself, and the service kit simply replaces the piston in the old cylinder bore). The job is relatively painless, but you need to know how to replace the brake fluid and bleed it through. You need the left caliper bracket assembly, a handful of copper / aluminium crush washers for the banjo bolts (4 I think), and the upper and lower mounting bolts.
But before you do any of that, a few tests that you can carry out to convince yourself of the problem.
With the rubber not in place, put the bike in neutral, and on its centre stand. Rotate the rear wheel by hand. Any sign of dragging ? A good yank on the rear wheel should result in 1-2 revolutions I suppose, but its not an exact science.
Then lie down on the left of the bike so that you can turn the back wheel with your foot, and get your hands on the front left brake caliper. The caliper should move a mm or two, and when it does, it should prevent you from turning the back wheel. More importantly, when you release the bracket, it should turn as freely as it did before.
A word about how to move the caliper. I can activate it rather like a brake lever with my fingers around the fork leg and my thumb around the back of the caliper. A firm squeeze is all that is needed to move it.
If you feel that you can ride it after doing these tests, then go out without the panniers on, and go out on the flat, or better still up a hill near to home. Check the temperature of the rear disc. Then ride a little way and apply the front brake to bring the bike to a stop. Check the temperature again. The back disc should be hotter. Then ride for a while and come to a stop without touching the brakes. The rear disc should have cooled down.
The reason it is a good idea to go uphill (if you have the choice) is purely practical. Its easier to come to a stop without touching your brakes, going uphill, and it's easier to get a bike back home if you encounter problems.
I put a full brake test procedure of this nature in the back of
'Avoiding the Pitfalls' - which may be of use.
But beware - that front brake caliper has got a bodge job on it, and it is masking a problem that has not been addressed by the previous owner.
Well done for looking over the bike and spotting something that looked odd.