The Dro's in Mach are as accurate as you set them up to be and as your machine can handle.
They won't actually work in the typical sense for manual milling. Say with the handwheels.
The motors are easy to turn with no power applied. They lock up to their holding torque when you apply power.
To use Mach 3 with a semi manual mode is easy to do using the MDI page. Type in where you want which axis to go and hit enter. In this case, the DRO's are accurate again as close as you have them set. Use the keyboard for manual milling instead of the handwheels.
Mach 3 does have backlash compensation, but I am unaware if it actually works when using the MDI screen or when using the jogging tab. I do know you can set it and it will work when running a program.