oscer wrote:
So I tried to align the mill spindle by indicating the arbor shaft that was installed in the lower bushing,
Not rotating the rotab to bore both holes is a step up, as that's where alignment is overly critical.
Having said that, unless the bore was in direct alignment with the spindle, the location of your indicator on the shaft would have provided concentricity at that specific point (with the spindle), but it would not take in to account the fact that the arbor itself is most likely not perfectly perpendicular in two planes. Thus, when you bored the upper hole, you would be concentric with the area indicated (assuming the shaft was a respectable fit in the bushing) but may not have been perpendicular. The net result is a pair of bushing that are not in a common plane, although they must be quite close. They can be out in more than one direction, and where the shaft marks the bushings when slid back and forth will identify the error.
That you managed to fit the shaft after boring, assuming you allowed reasonable clearance (no more than a thou), you should be commended for your efforts. That's not an easy thing to do and have it work out as desired, for the reasons I mentioned.
One thing I'd like to mention. When you have a bushing that is too loose, knurling isn't a great idea. It may displace material so the bushing will press, but the amount of surface area in contact may not be adequate to prevent the bushing from coming loose in due time, assuming there's a respectable load on the shaft. It may or may not serve as you hope, but now that it's done, I'd recommend you give it a go. Just keep an eye on it to see if it begins moving. Might even consider a drop of penetrating Loc-Tite if you have any doubts.
Well done!
Harold