Thanks to everyone for the help-
I finally got in my shop today, and did some testing (Dykim HiSpot) on the spindle, collets and arbors. I used the only really accurate indicator I have that reads .0002". I'm convinced there's a problem with the spindle-- the runout is ALWAYS directly away from the side of the spindle with the key--that is to say, the "high side" of the runout is right at the keyway. It's only .0015" , but this is only about 1/2 inch below the collet--much more further out. I think what has happened is that over the years, (this is a 1948 machine) the collets and arbors were intermittently drawn into the spindle with the drawbar without lining up the key with the keyway. When I got the machine the key was damaged, but there were two spare keys--so I simply replaced the spindle key. This may be hard to understand without pictures-- but I forgot to take them. Anyways, I think whenever tool holders (collets or arbors) have been drawn into the spindle without lining up the key-- the key has exerted tremendous force on the key side of the spindle mouth, and has literally bell-mouthed the spindle on the keyway side.! I can see this with the bluing. I can even measure this runout measuring the outside of the spindle-- again it indicates the spindle is bent out right at the keyway.
--So, I can't see fixing this myself-- but I'm open to suggestions--
--Maybe it's time to call Wells-Index and spend the $200 and get the spindle reground to a more common taper-- would fix two problems: spindle damage, and damaged hard to replace collets--
Looking forward to hearing from you guys--
Thanks in advance for any responses-
Bob