geetarman, you've got it right. Nightforce's instructions saying screw the eyepiece in 'till the reticule's fuzzy is the same as 'till the reticule's out of focus. Same as an 8 ounce glass with 4 ounces of water in it; some say it's half full, to others it's half empty.
The reason the eyepiece needs to be backed out unitl the reticule's sharp and clear is the "in focus" range is about twice as far beyond the focus point as it is in front of it towards the shooting eye. So using this eyepiece focus method, the eye piece ends up where it'll make the reticule sharp as the aiming eye goes through normal changes.
After the eyepiece is set, don't move it unless your eye changes. Focusing the scope at different ranges involves moving the lenses in front of the reticule.
You know about the mechanical axis and optical axis of a theodolite or jig transit? I laid out the 1000-yard rifle range north of Byers, CO, in early 1985 using one of the first electronic distance meters made. 'Twas a Hewlett-Packard one that the plant were I worked invented in the late 1960's. They kept that one for employees to use for whatever reason. What a marvelous machine and it worked well in the 5 below zero weather with the external battery pack connected.
The project for it was code named "Bear" as it was a real bear to get everything worked out to fit in the small case parts. But it sure was in demand; the Loveland HP plant had problems keeping up with orders. One of the engineers on the project had a cousin who was a game warden in Colorado: he asked him if he could have the DOW folks put 3-corner reflectors on the elk so folks could get accurate ranges to them during hunting season.