Hi Paul:
I have been drifting around in some of the threads you have going here. You seem to be focusing on parts of Stone's testimony: rockets only going to half the height of the masthead light; his mystery ship moving from SSE to SW1/2W.
If not optical illusions, tricks of the eye and sea, or simple human errors, have you considered the possibility that Stone ("the man on the spot" to use Lord's words to describe him) was simply trying to explain away his inaction any way that he could? After all, this data comes from his captain's demand for a written account of his actions that night.
As you know, Stone himself conceded that regardless of the height of the rockets, and regardless of his perception of that ship's movement towards SW, the most likely source of the rockets was that very same ship.
To me, it sounds at best like tricks played on the eye; at worst, like a big case of CYA.