Ok heres is what I would do if I didnt have home switches.
Move tool 1 and take a cut and measure the Dia and set that for the X DRO, next take a facing cut and set the Z DRO as zero. Now call a new tool, say tool 2. Move so the tool touches off the dia of the stock you have just cut, enter the size that it is into the X DRO for the Part Zero then press the Part Zero X button, you should now see that the actual X DRO has changed to that diameter. Do the same for the Z, move the tool until it touches the end of the stock, enter 0 into the Part Zero DRO for Z and press Part Zero button.
Repeat these steps for each tool, once you have done all tools you are best to open the tool table and apply. When you look in the tool table you should see offsets for X and Z for all tools you have set up except Tool 1, it should not have any offsets. That means each tool is set with reference to Tool 1.
Then to test just MDI each tool and you should see the X and Z DROs change to show the relative position of each tool.
I think I have the right buttons and DROs, reason I am not 100% certain is I have my own screenset and I have named the buttons differently.
Hood