There is a rule we use in the gage business called the "10% rule". It says that to have proper discrimination in my gage, my resolution should be no larger than 10% of my total tolerance. Now a days, since we need to pass a GR&R study, I find 5% works better. Applying that thinking to your...
As a gagemaker, I would expect to see it shrink approximately .025-.030. This may seem a rather inane suggestion, but I have seen it happen many time (including doing it myself). If your gage has an electronic indicator, make sure that it is setup for the correct polarity. On better indicators...