... not to mention that to measure 1/8 of a degree you need a precision tool. On the other hand you can measure 1 mm with very simple tools. It's much harder to measure angles than distances. Yeah, I know you can convert from one to the other, as Tom points out (hi, Tom!), but that's not your question. Believe me, I'm old enough to have used theodolites...
Using nonius (vernier) you can measure up to 1 minute of arc (that's around 10% error for 1 mm of toe, from the top of my head) with this thing
Sorry for the vernier gif... I couldn't resist: this is one of the smartest things I know
Besides, when you measure an angle using a plane that touches the bottom and the top of rim (which, given the shape of rims it's the only way you can do it) you're introducing errors that come from the entire shape of the wheel, while when you measure only the distance from the rim to a fixed point in the chassis you can average in an easier way the irregularities the rim could (will) have simply by turning the wheel around its axle.
Finally, to measure angles you need a
vertical reference. That's not always easily done and introduces another source of errors, because
on this Earth the vertical is never vertical. It's much more repeatable to measure a distance to a point in the chassis than to measure an angle to vertical.
The Earth is round... or not
Repeatability is very important: after all, you're not interested in getting 0.125 degrees of toe because that some kind of tolerance you have to follow (as when you're building an engine, for example): you're interested in dialing
the same toe you had in your last race, when you won.
So, 1 mm it is.