Yes the arm was moved to down position as in the picture in the my first post. However to move it to the down position it was removed from the brake housing and them rotated to the down position. The clunk has really only happened when I was testing the rear brake, so I was braking hard at a fairly low speed. The link below talks about this kind of clunk being common from hard braking on rear wheel. I don't normally use only the rear brake. I was just testing it after the tires were changed and since it made a clunk I was testing again with hard rear braking to see if the clunk would come back.
http://www.r6messagenet.com/forums/r...ar-brakes.html