Ron
Your statement re spindle runout is absolutely correct if using the electronic edge finder with a static spindle as recommended by PEC in the instructions.
However if the spindle is rotating slowly the runout will cause on/off of the diodes, this is not a problem if you want to position the spindle to the centre of a block/part by indicating one side and setting axis to zero then indicate the other side and divide the reading by 2 for the centre of the part.
If using to find the centre of a bore with the spindle off, indicate 1 side of the bore and and set zero, move tool away from bore surface and rotate the spindle 180 degrees so the opposite bore side is indicated with the tool in the same orientation as the first reading, divide reading by 2 for centre of bore. Move tool to centre found and set axis zero.
(Jason did mention this earlier but it is the method used by very expensive indicators and control systems in industry when setting spindles to the centre of bores).
Set the second axis in the same way, the dimensions may be different for each setting because the first position is not at the bore centreline, it is only estimated by eye or other means.
If using the electronic indicator on a manually operated axis that has any degree of backlash the advantage offered is that the edge will be found without reversing the axis handle to bring the mechanical indicator back inline.
Using a PEC to indicate front edge of a part and then the centre between 2 legs, video starts at 2:25
**LINK**
Emgee