Front wheel bearing question

[Boston Benz]

RE: my 1995 E320. I have read a lot of the threads concerning getting the bearing free play correct with a dial indicator. No one has addressed what pre-load is. I know what pre-load is regarding suspension. How do you pre-load the dial indicator to 2 mm? I'm using a digital indicator with its magnetic base attached to the hub.
1. Do I need to pre-load a digital gauge?
2. Does the brake disc really need to be removed to measure the .01 to .02 mm? The disc is attached via a set screw directly to the hub.

I replaced the front bearings months ago and obviously didn't do it right. I now got my hands on this digital gauge. This is maddening. I'm following the MB factory manual too. Loosen clamp with 5 mm screw, rotate wheel, tighten clamp, loosen clamp, strike spindle with a dead blow hammer once, then use gauge to adjust. I actually got the free play down to .01/.02 mm. (again, although I didn't pre-load the gauge), the triangular washer just turned the way it should. I then tightened the clamp to 12 Nm. Replaced dust cap, installed wheel, torqued to 110Nm, and I'll be damned, there is still obvious free play in the wheel while rocking the wheel at the 12 o'clock & 6 o'clock positions. What is going on? By the way, the free play isn't in the ball joint.