Actually I believe that's a misprint... the timing speck (1.00mm ) is from zero... so you zero the gauge rather than set it to 1.00.
In other words, I think you did it right the first time.
Actually it says that is the way to do it in two different sources, my Haynes manual and on
http://www.vwdieselparts.com/injtim.htm
Yup, to me "set the sweep to zero" is the operative phrase on the second picture.
This is how you do it.
bring engine to TDC with flywheel mark
then rotate the engine until the dial gauge stops moving. i've had a bit of difficulty with andy2 doing this.. because my gauge likes to 'stick'. make sure the shaft on the gauge isnt binding or sticking, now this is where you zero the gauge. now move the pump until the gauge reads 1.00mm travel. then rotate everything just to make sure nothing got out of place by checking the plunger travel etc. basically just a double check!