06 XJ8 L Is the rear brake piston compressed by screwing into the caliper chamber instead of the usual compressing it with a clamp? If so what tool is used? And how do I loosen the piston to change the pads?

Mark,

Try posting in the X350 section of the forum, you should get better responses there.

CK

+1 on posting in X350 forum.

The rear caliper pistons must be rotated and pushed at the same time to retract the piston so new pads can be fitted. Use a tool similar to this:

https://www.ebay.com/itm/Disc-Brake-...oAAOSwGOtdevNk

I was finally able to rotate the piston back in, no thanks to the tool I borrowed for that purpose. But somehow in the process the seal around the piston got pinched and torn. I am assuming that this MUST be repaired or the car will continually leak brake fluid.
Can the seal be purchased? I see no way of removing it without cutting. Will the whole caliper need to be replaced?

Not the sort of thing you could easily glue, is it?

A pain, ain't it?

Suggest get a pair of caliper kits; just a few dollars. This will replace the dust boot (thing that is torn) and the piston seal (the important bit that keeps the fluid in, plus retracts the piston a tad)

You can retract the piston on these by grabbing lip of piston and turning as you push in, A c clamp will help, turn a bit, retighten the clamp; repeat

Hope this helps!

As hisport posted,
Your dust boot is torn, a rebuild seal & boot should fix you brake caliper