Cut depth too deep on larger/longer bit

[phototomparkins]

I have the SD100 with the Vectric software.
I am attempting to use a Freud 3/16" Up Spiral Bit (75-101) bit and running a test pocket toolpath of .125, .25, .375 and .5 inches depth. Each pocket is 1/16 inch too deep.
Ran twice with the touch plate and with paper z-zeroing - identical results. Zeroed to the top of the board.
Running the same test file with Freud 1/8" O-Flute Straight Bit (71-040) every depth hits perfect.
The bits are the same length - but the 3/16 has more cutting depth - thus it doesnt go as far into the router to tighten at same point above the blades as the 1/2 cutting depth 1/8 bit does.
Putting the 3/16 deeper into the router than it should go - seem to minimize the extra depth issue - but i am tightening where the blades taper and not fully on the shank.

Question: is there a limit to how far the bit can stick out of the router and be above the board? If within the z travel distance of the CNC does it matter.
I came upon testing this because the clearing of a vcarve toolpath was too deep with the 3/16 tool.