Quinn,
Your post #10 really shows the limitations of Mach3. You should not have to map the error on any axis. I am a real fan of putting the feedback device on the load, be it a rotating (spindle) or linear load (table or carriage). But this requires closing the loop at the controller level, not possible with Mach3. Having the feedback device on the load automatically compensates for backlash within reason, but there is no substitute for a tight machine.
This is not to say that linear or rotary encoders are perfect, but pretty darn close. On linear moves the maximum error I get on my knee mill is +/- 2 microns using 1 micron resolution scales, even with 0.004'' backlash in my X ball screw. Circular interpolation is not good because of the X backlash, I can count on the circle being up to 0.002'' difference in the X and Y axis depending on the cutting speed. The servo just doesn't have time to correct for the error. That's going to get fixed in a couple of weeks, sending both ball screws out for rebuild.
The DMM servos are a bit lacking in the holding torque area, but with some tuning they can be tightened up, especially if you are using analog control. I tightened one up to where I could not feel any movement when the motor was locked, I was not able to achieve this in step & direction mode, but didn't have time to play with it further. After some communication with DMM tech support I now have a much better understanding of what all the setting do, the manual is a bit lacking in the torque mode explanations and in a couple of cases just flat wrong. Once I get another 1.8KW unit in house, I'll be putting it on the bench first to really understand the settings where I'm not pressured with time constraints.
The reason that I am going with a 1.8KW servo on the lathe C axis is because I have 4 other 1.8KW units on the machine and just want to keep them all the same in case of a failure, I can just swap out as needed. Right now I only have 2 products that the C axis would be used for, we do the second op on the Haas mill, but we could eliminate that step.
Right now my lathe spindle encoder is 1024 pulse (4096 counts/rev) which works fine for single point threading and rigid tapping, but when I add the C axis I'll most likely add a 90,000 count/rev encoder which will give a positioning resolution of 0.004°, and hopefully the actual positioning accuracy will be somewhat close to that. Do I need that kind of accuracy? No, but I'll try it just to see if I can do it. Million dollar machine accuracy on a budget.
The bottom line here is that the key to making all of this work is the controller. If you are going to build expensive machines, then it's worth installing the proper controls to make them work the way you want. You need to be able to close the loop at the controller and that eliminates Mach3/4. Galil, Dynomotion, or others are the way to go. But you are going to have to learn some programming and a new system. Based on your abilities with the Mach3 macros, I think you will have no problem learning a new system. It's all the same logic, just the syntax may be a little different.