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Phil,
There are numerous different styles of dial indicators. The one I prefer for this kind of work is a 1" dial with a back plunger. It is pretty easy to set up for sweeping the bore in the bellhousing. But, as shown in the photos that Dan provided, they can be set up at an angle and work just fine. As Dan said, the error in the reading from the instrument being set at an angle isn't important. You're just adjusting the bell housing so the reading is the same all the way around (or at least within .005"). I've had good luck using a mag base on the flywheel with a good ridged articulating arm. If you're not able to use the dial indicator that you have, it would be nice if you could borrow one because they're not particularly cheap. Also, you only need an indicator with .001" resolution. Don't get or borrow one with .0001" resolution...you'll drive yourself crazy !
Good luck
Ted
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