I tend to agree with you that this makes no sense ... Until ... You blow up the drawing in the manual until it is the size of a Movie Poster do you see what it is they want you to measure.
At First glance, it looks like you would be measuring bearing runout if you were to put the dial on the edge of the flange and measure the radial motion.
But what you are supposed to measure is the tangental motion of the Outer Mounting Bolt Boss in the Prop Flange as you ROTATE the Prop Flange.
In essense, How much play you would see at a Prop Tip, except there is no propeller to measure.
I agree! Clear as Mud! But at least this makes sense.
Something was Lost in translation I am sure.
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Converting this to something practical...
The manual specifies a 100% wear limit of 0.2mm (0.0079") at the 101.6mm (4.00") Diameter Bolt Circle Mounting Boss.
This extrapolates to a backlash of 0.1975" at 50" ... or ... 3.94mm at 1 meter Radius.
. . .
For those of you that do not run a 100" Diameter Prop (50" Radius Blades) ...
You would expect to see no more than 70/100 x 0.1975"= 0.138" of backlash at the tip of a 70" Prop.
I hope this helps.
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Note: This Post has been Edited/Corrected as noted in a post below.