Noticed this issue through an unusual sequence of events.
We are midway through a lathe conversion, in the mean time we are using EMC with linear scales as a glorified DRO.
However we noticed that when doing a touch off (to zero the display) it was always going to a fixed offset.
It turns out that the offset is the commanded position.
Basically when you press touch off, it is setting the co-ordinate system based on the commanded position rather than the actual position, given a servo system may well have some ferror at the time the end user is touching off it seems it would be more accurate to use the actual position than the commanded position for this process.
There was lots of discussion about this on #emc today, see http://www.linuxcnc.org/irc/irc.freenode.net:6667/emc/2010-09-16.txt starting at 2010-09-16 00:39:58.
It is surely working as designed so it is not a bug; I'm changing this report to be a feature request.
I don't think there's a consensus yet about whether this change is a good idea or exactly how it would work. I personally think it's probably a bad idea but I'm not sure enough to close it.