When using the RDM method, it is essential that the bar be perfectly round at both test points.. It isn't necessary that the two points are the same diameter but if they differ, that has to be taken into account so it's simpler if the diameters are the same.. When averaging the readings at each point, it is essential that it be done algebraically; i.e if you read a maximum of +.005 and a minimum of -.001, the algebraic average is (.005 +(-.001))/2 = +.002. It is also essential that the dial indicator not be disturbed as you move from one position to the next.
The theory behind the RDM method is quite simple. When reading minimum and maximum at any position, the algebraic average. is located at the spindle axis. What we are trying to do when removing taper is to align the carriage so that the cutting tool is at the same distance from the spindle axis. When the two RDM averages are equal, we know that a cutting tool mounted on the carriage is equidistant from the spindle axis.
Personally, I find the RDM method to be reliable and quite useful in multiple ways. In addition to running the traditional test, it can be used to check alignment in the vertical plane.. It can be modified to align the tailstock for turning on centers, eliminating the need for a test bar.. I also use it for aligning the headstock on my CNC mill to the z axis ways. The method is nondestructive and quick to implement, allowing multiple successive adjustments and verification checks.
The bottom line, though is to use whatever method you are comfortable with. If you don't have confidence in a test method, you won't be comfortable with it.
I think this is an excellent summary of RDM. The test bar may be bent or slightly crooked in the jaws to a small or large extent and it really does not affect where the center of rotation is. You can have a TIR at the free end of 0.10" or 0.0001", the center of rotation is still the center. The center of rotation needs to be parallel to the tool path to cut a cylinder with no taper. There are a couple of ways to find the center of rotation, RDM is by averaging the maximum and minimum indicator readings. Tho old school, more traditional, slightly faster, no math way is to rotate the test bar and stop at exactly 1/2 way between the maximum and minimum readings at the free end of the bar, now run the carriage back to the chuck and you will be measuring taper. The test bar should be uniform diameter but it does not have to be perfectly straight or perfectly mounted in the chuck. This is described in the excellent book Machine Tool Reconditioning by Edward Connelly, considered to be the bible of machine tool rebuilding and measuring. The center of rotation can also be found by cutting a bar and measuring the taper but that takes way more time and can use up the bar.
Another way of thinking about it is assume you have a test bar that is bent or mounted crooked in the chuck, if you rotate it so that it is pointing exactly up or down at the end, the front face will be parallel to the center of rotation.