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Whether you balance by the lugs or by the cone, the wheel is mounted by the lugs. If there is a bit of out-of-roundness relative to the lugs then I would think that regardless of how the wheel is balanced, there will still be some vibration as the rig goes down the road.
With that in mind, I think that balancing by the lugs will ultimately give a smoother ride than by the cone because the weights will compensate a little for the out-of-roundness of the wheel.
BTW, It seems odd that you noticed any variation when the tire was mounted by the lugs. It might be worth getting all the wheels spun by the lugs to see if they all vary or whether it is just one rogue wheel. Also, I wonder if there are any specs on concentricity for vehicle wheels.
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