the story you heard is probably true, i read somewhere this is one reason why America surpassed Germany in productivity in the 40's, might have seen it on television.... America made and refined precision equipment for the soul purpose of precision productivity, most German manufacturing didnt and wanted to stay with hand fitting, which slowed their productivity. it seems like American productivity was greater compared to German productivity and this is was one reason Germany was defeated in ww2... America was supplying, Britain, Soviet Union and ourselves and we out produced german tank and air plane productivity like 4 to 1....
in mold work, hand fitting is still somewhat done to a point.. when we assemble molds, you have to blue off the cores and cavities so they seal off on certain surfaces,parting lines, cams and corepins and such.. you use high spot blue and use pencil grinders, files and polishing stones to remove metal until the surfaces blue off..
my machine shop teacher in high school gave us all rusty blocks, looked like they had been sitting out side for years... we had to file them square and polish them... we didnt have to hit any size, just had to be square and shiney with no pitting..... then we got to put them in a mill and cut them up for our first project, which was a 1-2-3 block..
i dont center punch if i'm doing mill work. i always spot drill with the machine so center punching isnt needed... if i'm using a drill press or hand drilling i will center punch...