Hobgobbln,
I've got a picture around here somewhere of a Jig boring machine that shows the use of these rods, But there's also a thread over on the HSM forum describeing the use of these rods, It should be on one of the first 3 pages under general. If it were me, I'd build a proper D.I. mount for your lathe, (There's lot's of designs here) Build a small hanger with a V groove or bore slightly less than half a hole into it, Bolt this to the D.I. mount with the idea that the measureing rods C/L needs to line up with the C/L of the dial indicator. Build another small hanger and bolt that to the lathes apron. As long as the rods are held both vertical and horizontal true at each end you measurements will be as good as the accuracy of your D.I. and measureing rods. You can even copy your micrometer setting rods useing say 3/8ths drill rod and save the micrometer setting rods for what they were designed for, That way you won't lose their accuracy due to use.
To use them, Let's say for example you want to machine a reduced diameter on a shaft and up to a shoulder that is 3.375" long, To make this post shorter, We'll assume the work is sticking out from the chuck 3.5" and has been faced and center drilled, Supported with a center, and your faceing and turning tool is still in the exact same position it was when you faced off the work. Slide your D.I. and mount towards the headstock and leave it loose enough that it can be moved back and forth by hand, Drop your 3" rod into the hangers so their supported at each end and the D.I. hand is just starting to move, Lock the D.I. mount to the lathe bed, Zero the D.I. Remove the measureing rod. Machine the O.D. of your material by moveing the carrige to the left, The dial indicator tip will contact the inside of the rod hanger on the apron, When the D.I. has travelled .375 past zero, Your at your exact diamension. For this post we'll also assume there is no + - tolerances in either the D.I. or the measureing rods. This takes far longer to read than it does to set the lathe up and use the equipment.
One more tip that you may not know, Lets say after you've faced off your part and you change to a different turning tool and you want to know your starting position at the face of the material. Buy some Zig-Zag cigarette rolling papers, The ones you want come in the light blue package. These are almost exactly .001 thick. With the lathe off, Put the end of one of the cigarette papers on the face of the work and down past the materials C/L, Useing the aprons longitudinal feed move the tool tip till it almost touches the work face, Advance the tool tip while slowly moveing the cigarette paper up and down with your fingers, As soon as the paper snags between the work and the tool tip stop. Your now zeroed to your part face. There's nothing in this whole post that was invented by myself, I've read it all elsewhere, But I hope this helps you out.
Pete