My holes are coming out oblong, backlash is set up correctly, and the only thing I can think of is try and reduce the backlash on the machine as opposed to just using the backlash compensation in Mach 3, but was wondering if there's anything else I could do?

Hi,
backlash compensation is a myth. If you are trying to cut circular paths and your machine has
backlash the results are as you described. Fix the backlash.

Craig