You are aware that each rod will have its own scale factor and offset values because each rod is different? Even if you used SSI rods the offset would be different.
If so then I don't think this is a scaling problem. I think it is a mounting problem. Is the problem rod mounted differently than the good rod? Have you tried using a dial indicator. .020 inches is a lot.
A PID will not cure a feed back problem.
Are both rods using the same analog input card?
It is time for you to start telling us about all the things that are different between the rods. Mounting, location, power supplies, wiring, anything. You should be thinking about what causes a difference, any difference.
So far you have not said this is a control issue.
[OT]
"A critically damped loop will see some overshoot."
No it shouldn't! Under damped systems over shoot. Critically damped system aproach the set point exponentially. However this requires the proper form of PID and that usually isn't available on a PLC. The problem is caused by the zeros introduced by the P and D gains in the forward path. Another form of PID is the I-PD where the P and D terms are only in the feed back path and therefore dont add zeros. I-PDs can be tuned so they don't over shoot. What one give up is bandwidth.
Ask about this on another thread in the control section. I have graphs and Bode plots that show the differences between PID, PI-D and I-PD
[/OT]
Peter Nachtwey