Is it "nodding" on Z+ moves? By that I mean is it dropping the 2-3 thou you are seeing when when you move the head up, or are you seeing it on the plunge?
What are you trying to drill?
What size drill/endmill are you using?
First thing I would do is unplug it and grab the spindle with your hand and try and lift up on the head to see if the whole head is moving at the Z gib.
If it is moving I would tighten the Z gib and/or re-work the gib strip
You can set a DTI up on the top of the column or of the face of the column to check exactly how much if any it is moving when you lift on the head.
Oh, and from your pic it looks like I can see the gib adjusting bolt fairly proud of the column, you might want to try and tighten it up to see if that helps at all
JTCUSTOMS
"It is only when they go wrong that machines remind you how powerful they are."
Clive James