This is the method I have used for years, from the Suhr Forum where Ed Yoon from Suhr gave these instructions:
http://online-discussion.com/Suhr/viewtopic.php?t=1185&highlight=
As for the basic set-up procedure, it's essentially the same at most companies. As you know, John and I have an extensive background at Fender and our set-up criteria would be very similar.
First off, the guitar should be tuned to pitch so the neck has the proper amount of tension.
Next thing to check is the neck relief. John and our master builders are experienced enough to eyeball the relief, but to be sure, you can capo the first fret, press down on the low-E at the last fret and use a mechanics feeler gauge to measure the gap between the bottom of the low-E string and the top of the 7th fret. Fender's factory spec is .010" with a tolerance of +/- .002". John tends to set it at around .006". I tend to set it almost perfectly straight on my personal guitar since I play with a light touch. If you hit chords hard on the lower register, you may want to increase the relief to .010 or even higher. There is no hard rule to these settings - it's about what works best for your style of playing.
The action is set at 1/16" (4/64") at the last fret (bottom of the strings to the top of the fret). Again, depending on your style and touch, you may want to lower or raise the saddles. I set it at 3/64", which is pretty low, but because I use a fairly light touch, I don't have any fret buzz problems. In general, I think most people would be fine with 4~5/64" at the last fret. Some companies measure the action at the 12th fret (Ibanez) and some at the 17th fret (the neck-body joint). Ultimately, it's whatever feels most comfortable to you. Some players raise the action as high as 7/64" at the last fret.
The nut height is set at around .005". This work is best left to techs and luthiers if you're not sure about cutting nut slots. If you press down on the 3rd fret you need to see something between the first fret and the string. If you cut the slot too deep, you'll have no choice but to replace the whole nut. Filling in the slots with crazy glue and plastic dust is okay on $200 import guitars, but you wouldn't want to do that on a Suhr or other nice guitars!
The single-coil pickup height is roughly set at 1/8" from the bottom of the low-E string to the top of pole piece on the bass side and 3/32" on the high-E for the treble side. This is with the strings depressed at the last fret. This is a good starting point to move the pickups further away from the strings to balance the output of the different position pickups. You wouldn't want to get it any closer since the single-coil polepiece magnets can drag on the string vibration and cause lose of sustain and weird double-notes to sound.
For the humbuckers, you have much more leeway as they have much less magnetic pull than the single-coil pickups. A good starting point is 5/64" on the bass side and 3/64" on the treble side. Some players raise the pickups as close as possible to the strings and some lower them to the point that they're level with the body. Once again, the adjustability is there so you can set these things to suit your taste. Don't be afraid to experiment! Our factory setup is a good starting point and most people seem quite happy with it but it's not for everyone. I like my action even lower than John would normally set it and some are going to want it higher. Find what works the best for you.
