I modeled a building from 1905 based on a point cloud a couple years ago. The key is to know what the final use of the as-built model is. We were remodeling the building so the exterior was staying as is and all the interiors(most) were being demo'd and rebuilt. I created various walls systems that matched the exterior wall thicknesses and materials best we could determine them, then basically just traced the point cloud, but made everything more or less square. but created views with the point cloud on so if the design team needed to know exactly the shape of the existing wall, ceiling, column. etc. they could turn it on. I even left the point cloud on in some of our wall sections. It helped alot. We were the architects too, so we could make the call if the 2" diff. would affect us or not. If you don't know for sure I'd ask the client what tolerance they are after. But my guess is they would prefer a "square" model with the locations of major variants(1"-2") noted someway and not worry about the slightly out of square wall. If its way off, then yes model it way off. I put the point cloud on a sep. workset so the team could make sure to NOT open it when they didn't need it.