I know iv done something wrong here but it doesnt add up to me….

I bought a pair of xt brakes however the rear hand a long cable so i chopped it quickly and put it back on with the olive etc all ok. However, when i used the rear brake it doesnt really become active until it gets really hot. If i use it before it makes a cracking sound and also a horrendous squeal, then when it gets hot it works but still sounds like its cracking. I cant figure it out, im pretty certain i changes the rear pads aswell but its still doing it and there is still life on the pads… So confused, it may be a bike shop job or a re-bleed but its the cracking bit i cant get my head around. The levers dont feel spongy at all aswell. Confused….

Maybe you’ve contaminated pads/disc. Also are they metal pads? Give the discs a sand then bed pads in.

Is the best option to get a new rotor?

Caliper or rotor shifting?
Try greasing and re-tightening all the bolts.

Calipers solida, i can double check the rotor but im pretty certain there is no movrment in that