DoN. Nichols writes:

A) You can reduce the size of the dot with a tiny hole in a thin
metal plate. (Also the brightness.)

Don't be naive. Pinholing a big blob of light doesn't make it any more
pointy. You can't improve coherence outside the device, at best you
preserve what exited the laser device aperture. A pinhole will just
diffract and degrade coherence.

All of the follow-ups to date of my critique ignore the optical
principles that prevent this entire scheme from working. Specifically,
Gaussian beam optics, beam waisting, and beam divergence. Laser beams
are narrow but they still start at millimeters wide and spread out to
inches as they project. Have a friend stand 50 feet away and see what
kind of spot you get on a target from a good-quality laser pointer.

A simple scribed vernier scale with mechanical pointer lever and
magnifier would work better.

Lasers do not create precision out of nothing. They have to be attached
to precision mechanisms, which isn't the case for this axis on a round-
column mill-drill.

You're essentially trying to build a precision transit or goniometer
without a mechanism or scope. You need more than just a laser pointer.