What most prople do is export a vector file, like a .dxf, and use a 2.5D CAM program, like the free LazyCAM that comes with Mach3, or Vectrics Cut2D to create the g-code. That's the most accurate way.I am using CorelDRAW 12 to make basic shapes.
I've figured out how to use MeshCAM V3 to create a gcode file.
Doing what you're doing with MeshCAM is a completely different process. However, if you tell MeshCAM it's 1", it should cut 1".
Are you sure the machine is cutting the correct size? Are you sure it moves 1" when you tell it to?
In the .png file, is the circle the full size of the .png, or just a small portion of it?