Hi Dave, there could be a few issues here.
First, how did you set the tool to the X value (4mm)? Was it by touching the tool to the stock, and if so how did you judge "touch"? Was the stock running concentric? Was the tool accurately on centre height?
How much was the stock projecting from the chuck, could it have been bending under the cutting force?
Did the G code generated by Lazyturn have the correct X values in it, i.e. finishing at 7, 5, and 3mm? Could you post the code?
I always use the lathe in diameter mode and find it much less confusing - it's more or less standard on metric manual lathes to work in diameter and the X slide handwheel is calibrated in mm off diameter. I have a ballscrew on X axis though I haven't converted the Z yet, but I've never been convinced that backlash compensation works very well in M3 Turn so I don't use it, just avoid moves where it will be an issue. Depending on how you have it set up and how you are moving the tool before each cut it could contribute to your problem.