That limitation almost certainly is an artifact of PHD1 which could only report distances up to 2.5 pixels. These days with PHD2 there is no such limitation, and it would be great if Jared or Ken could remove the 2.5 pixel limit in SGP.
In the meantime I think your options are:
- disable dithering, or
- manually stop & start guiding after each dither (or periodically) to keep the lock position close to the guide star. (Make sure the Sticky Lock Position option is not enabled)
We will be making the change in PHD2 to ignore the Dec distance for settling when Dec guiding is disabled. However, we are about to release 2.6.2 and do not want to make this change until after 2.6.2 is released.
Andy