First off, Don't expect a definitive answer or possibly any answer, in just a couple of hours. If people read your post, but don't respond, it's probably because they don't know the answer.
Second, where was the indicator mounted to start with? or have you adjusted the other two gibs to get the best fit everywhere?
1.5 thou of play on each axis may be acceptable for a worn machine, but it means that you'll have to lock the non-moving axes every time you take a cut. The new condition is less than half a thou of movement (typically a couple of tenths) at any point on any axis and no more than three thou of backlash in any feed screws at any point. To achieve this, you'll almost certainly have to learn how to re-scrape a machine.
Basically, adjust the gibs so that movement is a little bit 'firm' at the ends of the travel and live with what you've got. If you're happy with the results you get, that's good. If, with time, you feel you need more precision, then be prepared to learn how to scrape and make precision measurements and plan on taking one to four years on a complete rebuild…
Mea máxima culpa. Some of us are sad enough to actually enjoy rebuilding our machine tools. We probably need pity from those folk that get on and build things with them! 
PS:_ I'm a very slow typer 
Edited By Mark Rand on 01/11/2017 23:03:56