Mini Lathe DRO Issues

[Toolmaker51]

Admittedly, didn't follow link to LittleMachineShop. Familiar with them, the Feed-Speed and Tapping Calculators are bookmarked on PC & phone.

Faced with same dilemma, initial route would depend on a carriage stop.
Before DRO's and Trav-A-Dial, we did this;
Ink pen a mark across strip of masking tape, attach across edge of compound slide and where it runs. That is a reliable index for which dial setting you wish to return, or progress in relation to threading. Same idea works on carriage handwheel, and dial collar, sometimes cross slide too.

Then and for time being, calculate the average discrepancy of readout to actual carriage movement, use it to approximate position of successive passes, then take measurements to set that feature in accord with dependable instruments.

My guess is play in handwheel shaft and bushings, which may include pitch errors in drive gear and rack.

I'd also remind LMS of dissatisfaction with that product; if there is no evidence of backlash, play or irregularities in the associated machine parts. Your description is clear enough, without witnessing first hand, it's a shot in the dark.