If you look at the Tormach lathe video, it looks to me like they have 5/8" tool holders in the turret, with some shims to take up the extra space. Course, it could be 3/4" tool holders in a turret design for 1" tools, since this is a video of the prototype turret. My understanding is that the final release turret will be much more compact, which might be the reason for the delay.
Regardless, it shows you that using shims would make it possible to use smaller diameter tools, and doesn't seem like it would be inconvenient.
https://www.youtube.com/watch?v=39jFRUYRYYw