OK Rick, first things first. Just holding in your hand, can you manipulate the contact and get indicator movement? You do understand that the contact/stem only rotate through a small arc on the bearings in the tip of the body?. It is not omnidirectional. Depending on exactly what indicator you have, you may have an auto-reversing indicator, or one that has a lever to switch sweep directions.
When you bring your vise to position, watch the needle and see if it moves with very light contact. Fractions of ounces. The shaft the contact/stem rides (in the bearings) in at the tip of the body has an axis that must be parallel to your anticipated movement of the contact/stem, which is perpendicular to the vise jaw.
If you know your indicator has 0.0300 travel, as an example, continue to bring the jaw to bear against the movement of the indicator until you have reach approximately half the travel. If if is the lever type, make sure the lever has tensioned the indicator in the proper direction. When you are satisfied that it is at approximately at the midpoint of travel, turn the bezel assembly to zero on the needle. That part is really a matter of personal preference. If you get used to using a DTI like this, you really don't need to zero it unless you are shooting for a given misalignment or taper, or are measuring something as in using it as a comparator. If you are simply sweeping in a vise or mill head, you want to see a minimum of needle deflection, regardless if it is near the dial zero or not. The exact number you are using for reference is immaterial.
Do you have any pictures of your setup? Perhaps I have uncovered your problem, or perhaps I have only confused you, but pictures are always helpful.