Yep, the barrel adjuster is for on the fly adjustments. I would loosen the allen nut that holds the cable to the brake assembly, tighten up the barrel adjuster all the way, and then do the final adjustment with the cable/nut.
I'm kind of anal about my bike maintenance. If my pad are worn and the cable hasn't been replaced in ??? I would do the cable too.
The Sheldon Brown and Park tool web sites have great instructions. The book, Zinn and the Art of Mountain Bike Maintenance is a great book to invest it.





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