Thank you Tjark, once you have the right idea in the head its just a matter of making swarf. Makes a difference that it is not a very complicated device to make.
Greg, I am quite happy with the finish, looks good with a additional finish pass between 0.1 and 0.2mm. I expect that this will the MKI model and will build a MKII version with improvements on spindle bearings, most likely some quality ER-11 collets (the collets used in this one I picked up one day on a show and they are not in a perfect state). I am quite sure that the bearing is responsible for the run out, I was very careful when setting the spindle in the independent 4-jaw. I have thought the same as you suggested, mount a small milling spindle (or what you suggest a small boring bar) in the vise and grind / turn the collect holder true when mounted in the machine.
The PC Mill 55 has a standard step resolution of 0.005mm. Since I use the original drives (designed an interface board to translated between the differential Emco drives and the standard TTL logic on a break-out board) this resolution is not changed. The spindle pitch is 10mm and in Mach I have 2000 pulses per rev. -> 10mm/2000p= 0.005mm/p
Regards Jeroen