The collet is nessisary to lock the draw bar into the spindle creatinga place for your spin in cutter. You need a split collet to lock routing cutters in place so that your machine controls the depth. You need a solid collet so that your machine can have limited travel while your cutter floats with a somewhat constant pressure across the engraving surface. The later of the two is for burnishing and diamnd drag engraving with a long cutter such as a rotating diamond. You may want to talk your cutter supplier about dragging a cutter of this type. I have been succesful doing silver belt buckles this way in the past. The machine doesn't have quite the finess and the featherweight gives you that extra soft touch.
