Hi Micheal,
I have to ask why your friend needed to sharpen his tool at such a critical point in the proceedings. If he was taking heavy cuts first, why did he not sharpen the tool when he was, say, 10-20 thou away from final diameter so he could still measure to check how much more was needed to remove. It would be much better to not sharpen the tool, and rely on the graduations on the dials. The accepted way to do the job would be to turn down till , as I said, about 20 thou over size, measure the job and dial in half the amount expected to be removed then measure again and dial in the actual amount needed. If you do it this way you are taking into account such things as spring and backlash. If you have a properly set up DRO, you can ignore most of the above, as MGJ will no doubt testify.
As for methods of touching, I go with a wet ciggy paper stuck to the job, advance to tool, with the lathe running, till the paper snags, and as has been mentioned above you still have a thou or so to go. Another method is to use a permanent marker, coat the job and again advance the tool till it just cleans the ink away. The trouble with doing the job this is way is that there is no load on the lead screw, unlike the first paragraph, so you can not be totally such how your cut will work. You will almost certainly have to put more of a cut on than you would expect.
This is one of those techniques that are easy to explain and show in a few seconds in a one to one situation but takes many words to do.
chriStephens