While I was cleaning the cassette, I notice as I spun it, it was out of round (not spinning on center line). Is this normal? I did not measure the run out, but it is noticable with the naked eye. So I am guessing 0.003 to 0.005.

It's normal. No worries.

Given that the teeth on a cassette vary in height or shifting purposes I find it difficult that you are noticing a wobble of the thickness of a piece of paper (0.003"). As said above, don't worry about it.