That is a mighty small diameter you are cutting. You will have more control over chip production with a hand-ground braised carbide tool. The tool pressure which most carbide inserts need to cut (due to their edge geometry), can encourage more of a smearing (versus cutting) action on small diameters. Tools for cutting small diameters gain a benefit from a smaller radius Chip Breaker groove cut into them. A stone honed edge helps as well. They guys who work with "mini-lathes" are constantly dealing with small diameter parts. It may be counter intuitive, but read some of the tool-grinding postings by the folks who have the 7 X 12/14/16 and Sherline lathes. They swim in these waters daily. They get great finishes, even with less horsepower and rigidity.