@skmetal I believe he is using a collet, just a weird long adapter kind of thing from the looks of it...
and about your diameter that you milled...well you notice its exactly half of the cutter, because you have to take into account the other side of the circle, so if you move it a quarter of the actual size, then when you think about it, that would be half the cutter! That probably doesn't make much sense, and its been a few months since I machined but I was confused by this same thing when I was CNC programming a circle by hand. Good luck, and keep up the good work!
edit: and one more thing, you really should move that cutter in more, so it isn't hanging out so far, chatter city!! rigidity is our friend