I have just used my ER25 collet set to hold a piece of 1/4" square brass to machine the fork end for the eccentric rod fitting for my S50 yesterday, it held it in the slots quite securely & didn't need any centering, the 7BA tapping hole was bang on centre, so I would have any hesitation in using this method again ( Have used the 16 mm collet in the same manner for a large 5/8 " hexagonal bar ).
One thing to be aware of; some collets have the diameter size that only goes 1/2 way along the inside of the collet then opens out to a larger dia. ( clearance ) so if you need to machine a tiny piece then you need to put a same diameter offcut in the back of the collet to even out the clamping forces, or may be a larger dia. to fill the back of the collet otherwise you will clamp unevenly & possibly have the small piece come flying out of the collet or even damaging the collet, worth bearing in mind.
George.