Dave , Sorry to hear of your woes with an ER 40 collet chuck. Not sure what type of lathe spindle nose you have but the one that I mounted my ER 40 on is a camlok D1-5 It is vital that the baclplate is machined flat and at 90 deg to the spindle axis, or else any deviation from that will be magnified the further away from the spindle nose you go. I took particular care to get that right and have very good readings even at 125mm from the collet face.
You can see the results in a previous thread about the collet chuck. I hope you can sort it, as they really are very accurate and very repeatable. I wish I had got one years ago.