The difficulty with machining small parts on (relatively) large
machines is the lack of high speeds required for small diameter work,
be it the turning of shafts, drilling of holes, milling of features.

I own a Maximat V10P with a top speed of 2500 rpm (roughly a ten inch
lathe) and small turning/drilling drilling is not easy on this machine.
It can be done but takes great care not to break the part or drill,
tap, die, etc.

For small stuff, say 3/16" dia or less I have a swiss watchmakers lathe
complete with toolmaker's cross slide, 3 and 6 jaw chucks, and a Dremel
drill chuck fitted to the tail stock. It has no povision for
threading, but for these small sizes taps and dies are more
appropriate. For the tiny stuff this machine is a pleasure to use.

If you already have the 12" lathe, or it is priced too good too pass
up, your solution may be to fit a watchmakers spindle into the
headstock taper. This is a small, separately powered spindle which
will accept watchmaker lathe collets and chucks.

Being separately powered it can have the high speed desirable for small
work.

Wolfgang