I have been using a .0005" Test indicator for the 6 years since I started machining and haven't needed anything more until recently (going to pick up a .0001"). I would highly recommend getting a "Swiss Type" one with the extended travel range (see http://www.fowlerprecision.com/Products/Test-Indicators/38mm-X-TEST-Test-Indicator-52-562-008.html) I have the inch version, but the extra tiny dial keeps track of how many times you've gone around. I own two other .0005" indicators and I wont touch them unless this one is on a setup.
Check out this site, they have awesome prices and good service: http://www.jtsmach.com/store-1/
If you can spare a little more, this is my exact model at a great price: 52-562-001
and the .0001" I will be picking up shortly: 1-818-215GA
Check out this site, they have awesome prices and good service: http://www.jtsmach.com/store-1/
If you can spare a little more, this is my exact model at a great price: 52-562-001
and the .0001" I will be picking up shortly: 1-818-215GA