What is SGP monitoring to "Settle at < x.x pixels"?

Keith,
PHD2 makes the determination of settling done and notifies SGP. PHD2 uses the criteria passed to it by SGP to determine when settling is complete.
Settling is done when the guide error stays below the tolerance setting for the specified time interval. The guide error is the distance of the guide star from the lock position, regardless of direction. So yes, you are right, it would be possible for the Dec drift to prevent settling when the dec error exceeds the settling distance.
We can look at changing the settling criteria in PHD2 for the case of RA-only guiding. I'll discuss it with the other developers to make sure we're not introducing any problems by making that change.
Andy