If its of any use a continuous move from x0 away from the indicator to x+1.2 reads .5990'' and when I move all the way back to X0 (into the indicator) its .0004'' short of returning to complete zero.

Did it again and got .5985'' and a complete return to zero as near as damn it when I moved back to X0.

Another test you can do to confirm it is lost motion is move onto clock and zero clock then go in the same direction with a commanded move and it should be close. If it is then you definitely have lost motion.
Hood

Sorry don't understand that last one Hood.

Just put the indicator on the end of the screw with the cross slide set furthest away from me, set zero on the indicator and then did a SHIFT, Down Arrow, so quick jog towards me, the indicator moved and max run out looked to be .001'' more like .0008-9''. It ended run out at .001'' closest to me. if I jog it back away from me it goes back to zero at the far end.

Please explain the other test again and i will do it.

What I am saying is move onto the indicator and zero it then continue to move in the same direction as you moved onto it, I understood that you had moved onto the indicator the last time then backed off with your moves, maybe I misunderstood?
Hood

Thanks hood I'll do that test tomorrow.  Can't I just start with the dial indicator touching and zeroed and then move forward and back

Yes that would do, the first move I think would be correct then moving back would show the error.
Hood

Ok
I have done a number of test and hopefully they will generate some meaningful info.

First I set the .001'' per graduation dial indicator against the tool post, zeroed it and commanded the lathe to move forward, into the indicator 1'', I'm in diameter mode so x-2 was used. Moving in the dial indicator swings clockwise and out anti clockwise.
I then did X0 to get the lathe to move back, away from the dial indicator to the zero point.

I did this 10 times in and out.

1. X-2, dial was short of 1'' by .002''
X0, dial was short of returning to zero by .0005''

2. X-2, dial was short by .002''
X0, dial was short of returning to zero by .0004''

3. X-2, dial was short by .002''
X0, dial was short of returning to zero by .0004''

4. X-2, dial was short by .002''
X0, dial was short of returning to zero by .0004''

5. X-2, dial was short by .002''
X0, dial was short of returning to zero by .0005''

6. X-2, dial was short by .002''
X0, dial was short of returning to zero by .0004''

7. X-2, dial was short by .002''
X0, dial was short of returning to zero by .0004''

8. X-2, dial was short by .002''
X0, dial was short of returning to zero by .0005''

9. X-2, dial was short by .002''
X0, dial was short of returning to zero by .0005''

10. X-2, dial was short by .002''
X0, dial was short of returning to zero by .0005''

I then re zeroed everything and got the lathe to move into the dial indicator and back out by .500'', so X-1 was used, then X0. I did this 6 times.

1. X-1, dial was short of .500'' by .001''
X0, dial was short of zero by .0001''

2. X-1, dial was short by .001''
X0, dial was short of zero by .0002''

3. X-1, dial was short by .001''
X0, dial was short of zero by .0001''

4. X-1, dial was short of .500'' by .001''
X0, dial was short of zero by .0001''

5. X-1, dial was short by .001''
X0, dial was short of zero by .0002''

6. X-1, dial was short by .001''
X0, dial was short of zero by .0001''

I then reset everything and got the lathe to move into the indicator by .500'' and then do another move into the dial indicator by .500'', so doing 2 moves totaling 1'' and then moving away back to zero. So X-1, X-2, X0. I did this 5 times.

1. X-1, dial was short of .005'' by .0012''
X-2, dial was short of 1'' by .0022''
X0, dial returned to zero.

2. X-1 dial was short by ,0012''
X-2, dial was short by .0024''
X0, dial was over zero by .0001''

3. X-1, dial was short by .0012''
X-2, dial was short by .0022''
X0, dial was over zero by .0001''

4. X-1, dial was short by .0014''
X-2, dial was short by .0025''
X0, dial was over zero by .0001''

5. X-1, dial was short by .0012''
X-2, dial was short by .0023''
X0, dial was over zero by .0001''

I also did a series of .001'' moves into the indicator adding up to 1'' total movement, the indicator was short  by .0012'', the same as one complete move.

OK things are just getting confused here or at least I am. Can you do one test for me
Place the clock onto the saddle and have the point towards the toolpost, jog onto the point and zero the clock. Go to Tab screen and set it to step jog mode and set a value in the increment size, lets say 0.1 then going in the same direction do a step jog move and read clock, do another still in same direction then another, assuming your DTI has enough travel. Then reverse and step jog back to zero again.

Hood

Just tried something else.

Set the dial indicator up against the x axis so I could measure forward movement.

Put some 1'' stock in the chuck and set the X Part Zero to 1'', touched X against the edge of the stock and set zero in Mach 3. Also set zero on the dial indicator at this point too.

Now I use the command G54 X0 and the tool tip moved forward to the centre of the stock. Dial indicator shows that it is short (or oversized) by .0035'', not brilliant but still couldn't account for the dreadful inaccuracy I'm getting.

Next I measure the stock and its actually not 1'' its .995'', so I reset the fixture table, put .995'' into X Part Zero, touch X against the stock again and zero Mach, I also zero the dial indicator again like before. Now I command G54 X0 to position the tool tip at the centre of the stock, dial indicator now reads .005'' short !!!!

Reset everything and do just a normal X-1 command and the tool tip moves to the centre of the stock with only .0015'' short.

So what I have discovered is that the G54 X0 command adds another .002'' error to the movement with a 1'' diameter stock (total .0035'') and another .0035'' error if the stock is .995'' DIA (.005'' total).

Nevertheless these errors are all short of commanded diameter and therefore the stock would be oversize when cut. I end up with .015'' undersized stock after cuts.

I can only presume that the Turning wizard i am using that came with the software is doing something too.

What version of Mach are you using?
Hood