Smitty,
I noticed that you said that after you "touch off" the material, you back off the cutter .100 and then reset your Zeros.
Well....this may be why you cut so much air. Onecnc lathe will put .100 default clearance to your Zeros. ( you can change this, it's under the "Boundary selection" dialog box.
Check what value is in this clearance box, sounds like maybe you have a value of around .220. (your .100 plus .220 in dialog box = .320 clearance)