Am I rest machining correclty?

If you are seeing that your smaller bit is going over areas that have already been done by the larger bit, you may be running into this bug:

As a work-around, try this:
Instead of entering the the actual size of the previous bit, try entering (previous size - current size). In this case, since you are going from 1/16 to 1/32, change the previous size from 1/16 to 1/32 (i.e, half of what you have now).

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