I'm using the O/B interface and was planning on using a 1/2" V bit (1/4" shank). However, when I set up to probe the first step 'bit diameter' only goes up to 1/4". Is it still ok to use if I leave it on 1/4" and continue to probe? I'm new to this so it's all learning at the moment.
You should not use V-bits to zero XY. Use a dowel pin or regular endmill to zero XY. Then fit the V-bit and ONLY zero the Z axis.