Sorry. Had to leave early yesterday plus I was having problems of my own. Talked to our maintenance guy this morning. He tells me Z home should be close. If you want it set perfect, then you will have to change the Z grid shift. Should be parameter 545. Paper I am looking at calls it "Drift shift Z".
Turret face is Z0. Spindle nose is Z0. I hope you got the handle working. I've never had to reset Z0 on an incremental encoder, but I think this will work. You are going to put a 1 inch jo block between the spindle nose and the turret face. This is why I hoped you had gotten the handle fixed.
Set the workshift to Z0. What does the W read in the ACTUAL POSITION (RELATIVE)? If not 1.0000, then you need to change the value in parameter 545. Don't know if it works the same way as setting a probe, but this is how I do it set the probe to read the correct geometry.
Multiply 25400 times the amount the turret is off. Add or subtract this value to the number in parameter 545. Only use the numbers to the left of the decimal point. Does the W read 1.0000, or is it off by more than before?
This is only a guess on my part. Hopefully it is set the same way as a probe. That way it will only take you a max of 2 trys to get it adjusted correctly.
EDIT: If this is wrong, then I hope that someone else will chime in with the correct method. You could always call Hardinge Brothers again. I am a programmer, not a maintenance man. Nor do I want to be one. I can do a few things, but best not to let the powers that be know. I already have more work than I know what to do with.
EDIT: This is assuming you could home the machine.