allyd,
Suggest testing out your machine some to get a flavor of just what it can accomplish.
For example, machine the outside of some round stock, 1" dia down to .8" and also .9"
in a stepped fashion. Also machine a circular pocket of say .75" into it. The depths only need to be
deep enough to measure accurately. Do the same for a different diameter, say 3". If you have backlash,
use backlash compensation. You may want to leave some stock for a finish pass.
Spindle runout, how the mill head is set to the table, backlash, x & y screw accuracy, table play, gib adjustment,
how accurately your steps per unit where set,etc....... all come into to play in trying to cut that "perfect" circle. Play around some and see what tolerance your machine can hold.
Note that a mill is not a lathe but approaches it these days.
RICH