Not being familiar with this software I can give only generic advice.

Do you want the circle as a hole or as the finished piece? That will make all the difference in the world.

If the circle is the final piece this might work.
Make a .001" cutter mill tool, this will keep the settings within .001". Make the circle .125" larger than needed. Then cut it out.

If the circle is a hole.
Again make a .001" cutter.
Then make the circle .125" smaller than needed. You will now have a cutout within .001" diameter of your needs.

Philadelphia, PA (Really Bensalem)

When you finally understand it completely... it changes.

ok varn
3.175mm equals .125 in. 2nd i have never see a cad/cam software that allows you to work in metric and decimal at the same time. i have never used engrave lab but it shouldnt be much different from the others. as long as you use and convert all the values to metric or decimal everything should work out. as for your question in most cad/cam softwares you can set the tool path to the outside, centerline and inside the line you are machining, and some softwares allow you to fudge the inline and outline. my question would be: how much oversized is the part you cut. if your centerline cutting it would be .125 to big......so how much to big is it

Okay, I figured it out (this is called "learning curve"...

The symbols that you create in EL automatically have the tool path applied unless you tell it not to engrave it, or delete the symbol, after you create the proper tool path.

So, although the tool path using the "fill" was set correctly, taking the width of the tool into account, the symbol that I used originally was not - it was not taking the tool width into account.

So, I deleted the symbol, which just left the tool path, and it engraved at precisely 39mm.

Thanks for the help.