The compound is .927" below the centerline on my G0602. The AXA type tool holders are usually (Aloris, Phase II, Shars) specified at 15/16" or .9375" which would be .0105 over center for a 1/2" tool bit. Dorian shows theirs at .875" or .052" under the centerline.
I measured two 250-101 tool holders with 1/2" bits from Grizzly at .944" and .947" , .023" and .020" over the centerline. Shars sells a 250-101XL which is specified for 5/8" tools and measure out at .912" and .917" or .015" and .010" under the centerline with a half inch tool bit. I also measure the 4 way tool, post sent with the lathe and it measures .891" to .897" or .025" and .020" under the centerline with a 1/2" tool bit. Measurements were made with a digital height gage.
The Shars catalog states a 15/16" upper level height which implies that the minimum tool height for a 5/8" tool bit is equal or less than .9375 and for a 1/2" tool bit, the minimum tool height would be equal to or less than 13/16" or .8125". Clearly, their product specification does not match actual measurement.
The bottom line? The OEM 4 way tool post that I received with the lathe will properly seat a 1/2" tool bit on my lathe. Standard type 1 tool holders from most suppliers will not work with 1/2" tool bits on my Grizzly G0602. The Shars 250-101XL and possibly the tool holders will work (barely) on my lathe
There is no requirement that an AXA QCTP fit a Grizzly lathe. When people buy a QCTP, they make the height measurement on their lathe to determine suitability and order accordingly. Grizzly does have an obligation to ensure that their OEM tool holder works as specified. I would measure the distance from the base of your tool holder to the floor of the tool slot (mine is .394") and the distance from the top of the compound to the centerline of the spindle (mine is .927"). I would also measure the distance to the top of the cross feed (mine is 3.100) and the distance to the flat of the ways (mine is 5.005). In creating your problem, the tool holder, the compound, the dial, the cross feed , carriage, and the headstock itself could all be suspect. You should be able to narrow the field with a few measurements.
Bob