Hi,
<later edit: I wrote the following thinking about Mill mode. Only the next day did I realize the question was posted in the Turn section! 
Are you running a lathe and I answered totally weirdly due to my default mill orientation? 
>
I think that there are a couple of concepts that may help here.
adam wrote:I don't understand the master tool mode set up and how it relates to the part coordinate. system
The first concept is that master tool mode only applies to the Z axis. Master tool mode is a technique for dealing with tool length offsets (TLOs) and as such it only impacts the Z axis. This is totally independent of the diameter of a tool. I'm sensing that you think that Master tool mode is related to tool diameter (and hence X and Y position), but that is not the case.
The MSM manual goes into pretty good detail for TLOs including diagrams of exactly which value is the TLO for both regular and Master tool modes. If you have read the material in chapter 5 of the manual, and it didn't help, alas I don't have a better explanation available. Sometimes My writing approach does not work for everyone, and a different explanation style can help. For learning about gcode, coordinate systems and TLOs, there are multiple books available, one that many people like is Peter Smid. "CNC Programming Handbook" (now in it's 3rd edition).
adam wrote:The problem I am experiencing is: when I take a test cut and measure the diameter <and then> type that value in the X position DRO, with master tool mode on, i see the WC current Pos values change X = +.500 Z=0
In Mach, whenever you type a value into an axis DRO, you are telling mach that that value is now the current position of the axis (in work coordinates). Since typing in the value does not (and can't physically more the machine) the machine coordinate does not change. But something has to change because the equation: WC = MCoord - WC offset - G92 equation must always balance. This equation is laid out in the upper coordinate panel on the WC offsets pages.
If you watch when you type a value into the X DRO, the WC offset value changes by a corresponding amount.
This same action will happen for X or Y independently of master tool mode being on or off (because that mode has nothing to do with X or Y).
The same thing happens for Z - typing in a value to the Z DRO will change the Z WC offset.
adam wrote:When i jog the tool away from the work piece in the X the WC current pos increments in the positive direction. In my mind, I want to see the DRO increment in the negative direction
thank you for your help
Well, that may be what you want, but it is not how Mach (or other CNC machines) work.
Mach is showing you the current position of the tool tip. When you jog the tool in the positive X direction, the DRO will increase in value. You did not say what type of machine you are running, but it sounds like a typical vertical mill. When you jog the spindle, the table moves, and you are probably thinking that the DROS should show the table position relative to the spindle - but that is not how it works. The reference point is NOT the spindle, it is the WC zero point. The DROs always show the spindle position relative to wherever WC 0 is set. So think of the WC zero point as fixed to the table. When you jog the spindle "right" the DRO increases as the X distance has increased (even though the table is what moved and it moved "left").
This is a common source of confusion for folks. Set Zero to a spot in the table and mark it with a piece of tape or something. Now jog the spindle in the X+ direction. Use a tape measure to measure FROM zero to the Spindle - and you'll see that all the numbers are doing as they should. jog a bit more in the X+ direction and the X DRO will increase in value (just as the tape measure will be more extended to get from Z to the spindle).
One word of caution: all of Mach and MSM etc assume a standard "right handed coordinate" system. If your machine was set up with a left handed coordinate system, I highly recommend that you reconfigure it to a standard right handed system (Google "Right hand rule" for more info.)
Dave
P.S. On the quotes above, I took the liberty of inserting some missing words, along with capitalization and punctuation so that I could figure out where where I thought the sentence splits were supposed to be.