Z axis plasma homing problems

I have been working on this for a few weeks and I have come to the point It seems I don't know enough or have confused myself to the point I can't tell if I am coming or going.

In an effort to teach a man to fish could I ask one of you to just give me the outline of what I should be using to determine the correct parameters.  I was trying to use the below diagram to come up with the recipe but I am outsmarting myself I think...
The switch does work and and I can get some function so the TB3 setup is correct I think. The limits/homing is killing me.

My Z has a 3" travel with a combined proximity limit/home switch at the top Z+ and float switch on the torch holder.
I am thinking the ideal was Z max height at 3" bu maybe that was not correct, should home be 0 and the slats be -3"?
I got it working with home at 2.75" but for some reason I decided that was not correct and I tried to change something (can't even remember what now) and I broke it.

There is not much point posting my  HAL or INI because I have changed so much but I suppose I will put the INI in here anyway, just be aware the current config is miles from where I started.

[AXIS_Z]
# MAX_VEL & MAX_ACC need to be twice the corresponding joint value
MAX_VELOCITY = 4.0
MAX_ACCELERATION = 100.0
OFFSET_AV_RATIO = 0.5
MIN_LIMIT = 0
MAX_LIMIT = 3.25

[JOINT_3]
TYPE = LINEAR
HOME = .0
FERROR = 0.5
MIN_FERROR = 0.05
MAX_VELOCITY = 2.0
MAX_ACCELERATION = 50.0
# The values below should be 25% larger than MAX_VELOCITY and MAX_ACCELERATION
# If using BACKLASH compensation STEPGEN_MAXACCEL should be 100% larger.
STEPGEN_MAXVEL = 2.50
STEPGEN_MAXACCEL = 62.50
P = 1000.0
I = 0.0
D = 0.0
FF0 = 0.0
FF1 = 1.0
FF2 = 0.0
BIAS = 0.0
DEADBAND = 0.0
MAX_OUTPUT = 0.0
# these are in nanoseconds
DIRSETUP   = 5000
DIRHOLD    = 8000
STEPLEN    = 2500
STEPSPACE  = 2500
STEP_SCALE = 2000.0
MIN_LIMIT = 0.0
MAX_LIMIT = 3.25
HOME_OFFSET = -.25
HOME_SEARCH_VEL = 0.16667
HOME_LATCH_VEL = 0.16667
HOME_FINAL_VEL = 0.16667
HOME_USE_INDEX = YES
HOME_IGNORE_LIMITS = YES
HOME_SEQUENCE = 0
#******************************************

 

Thank you Tommy, exactly what I needed.
After MUCH MORE trial and error before seeing your reply I got it to "work".
I found many problems with my limit/homing but I also found I had the velocities set waay to high causing lost steps which exacerbated the limit/homing problems.
I noticed a "buzz" or "beep" sound that was actually the motor stalling instead of positioning.

Here is the INI from the current working config, before comparing to your suggestion.

[AXIS_Z]
# MAX_VEL & MAX_ACC need to be twice the corresponding joint value
MAX_VELOCITY = .5
MAX_ACCELERATION = 12.5
OFFSET_AV_RATIO = 0.5
MIN_LIMIT = 0.0
MAX_LIMIT = 3.5

[JOINT_3]
TYPE = LINEAR
HOME = 3.0
FERROR = 0.5
MIN_FERROR = 0.05
MAX_VELOCITY = .25
MAX_ACCELERATION = 6
# The values below should be 25% larger than MAX_VELOCITY and MAX_ACCELERATION
# If using BACKLASH compensation STEPGEN_MAXACCEL should be 100% larger.
STEPGEN_MAXVEL = .32
STEPGEN_MAXACCEL = 8
P = 1000.0
I = 0.0
D = 0.0
FF0 = 0.0
FF1 = 1.0
FF2 = 0.0
BIAS = 0.0
DEADBAND = 0.0
MAX_OUTPUT = 0.0
# these are in nanoseconds
DIRSETUP   = 5000
DIRHOLD    = 8000
STEPLEN    = 2500
STEPSPACE  = 2500
STEP_SCALE = 4000.0
MIN_LIMIT = 0.0
MAX_LIMIT = 3.5
HOME_OFFSET = 3.2
HOME_SEARCH_VEL = 0.15
HOME_LATCH_VEL = 0.008
HOME_FINAL_VEL = -0.008
HOME_USE_INDEX = NO
HOME_IGNORE_LIMITS = YES
HOME_SEQUENCE = 0
#******************************************

I think I have it dialed!First successful homing of the project. 
even air cut a 6"x6" square.