Mike, if you can see a noticeable offset I think you can be quite sure that that's your problem. It'd be great if your paper idea works. If it does not and you are willing to spend some money, try obtaining Takahashi 0.965" collet holders and having a machinist attach it to a 1.25" sleeve. I've seen it done and looks great (and presumably works well), but pricey like your custom adapter idea.

Now that I think of it, finding a good 0.965"/1.25" adapter is one of the reasons why I've held off on finding a pair of 18mm SMCs!

Mark