Would backlash make holes smaller or bigger?
Don't know as it's more complex than just a yes or no.
I used backlash compensation (BC) for a long time. It's a work around that if applied appropriately
can compensate for the mechanical inaccuracies of machine components. The best solution is to
get rid of the backlash (minimize backlash is a better term ). BC coupled with good machine code
can accomplish machining a hole such that a bearing fits just right.
BUT ..... BC settings can vary and other component inaccuracies come into play when accuracy is desired.
Can elaborate more on this if you so desire.
RICH