There are basically two methods to zero the sighting on a revolver that uses a notch rear sight. Note, when I say "zero" it is with the assumption that the rear sight is perfectly centered on an adjustable rear sight.

Method one is to mount the barrel with that front sight perfectly straight up. After getting the barrel perfectly aligned the gun is then placed into a frame vise and the frame is bent slightly by smacking the barrel with a lead hammer. On a gun with a swingout cylinder the frame is weak enough around the barrel mounting point that it will give a bit and bend. On a gun like the SAA that has a fixed cylinder the result of doing this is likely to be a bent barrel.

Now, I may be wrong about this, but I believe that the second method was orignally developed to "get around" the issues with that robust barrel attachment point on the Single Action Army. The second method is to "clock" the front sight by tipping it the correct amount to get the windage correct.

Frankly, I rather prefer the concept of the second method. It may not be quite as pretty if you look really close but smacking the barrel with a lead hammer in order to bend the frame seems rather extreme to me.

BTW, I don't believe that S&W hand tests each individual gun to center the sights. It's likely that they have a chart that tells them how much to clock the barrel for a particular model and if it's close in the test firing it gets boxed up. With adjustable sights, close is plenty good enough to allow the owner to tune the sighting till it's perfect.