Keith,
I'm reading from the same book and you are correct. By taking the high points of two cylinders you are constructing the datum axis A-B. In turn what you get is a line between the two. I work with sheet metal parts not having the option of measuring cylinders. Thus explains my datum call out on the CL. Normally in this case I would construct a line from the individual surface center points and call it -A-. Looking at the drawing, my confusion was that you were being told to use just the surface center point of the larger hole as your datum -A-. I see that's not the case and you do have a primary axis established correctly. The profile on -C- would also be acceptable.
Regards,
Geoff
Sr. CMM Programmer
Lapeer Metal Stamping
LMS Metrology Lab
Lapeer, MI