Inlay Tolerances Using Easel

Hi All: I have been using Easel for my Inlays for a couple of years now with great success. Recently I switched out my driver board, calibrated my machine to within .001" and I tried to do a simple inlay with a few problems. On all my inlays the inlay piece is always tighter. I checked my bit and it measures .125. I start by importing a shape via Image Trace, I set my preferences and import the image. Then I resize it and use the Inlay App, I set my bit size to 0.125 and my tolerance to 0.008. I watched Mo’s video about the tolerance settings where she says 0.003 would be a tight fit so I go 0.005 larger.

So my question(s) is 1) am I missing something with my setup? 2) what tolerances are others using that work for them.
I have read through all the forums but I can’t cut the inlay first and then the pocket because of burr on the surface so I want to be able to take both pieces through the thickness sander to clean them up and then test fit.
Any insight will be appreciated.

Thank you
Steve B.