You know, you're completely right. I saw 'reserve' and immediately thought moody dwarf, re-reading carefully, it does appear I was wrong. :/
So I'll just say "What he said" with the addendum that, to a dwarf, "closest" means "as the mole digs" not "path distance."
What this means is that a rock 2 zlevels straight down is closer than a rock 3 tiles over. Despite the second rock having a path distance of 3 and the first rock having a path distance of 300.
One tactic that require less micromanagement is to have a stockpile that accepts what you want to be decorated next to the workshop (along with a stockpile for the appropriate kinds of gems). Then install a lever operating the door to the workshop/stockpile area. Change the profile of the lever so only the jeweler can pull it. He walks in, pull the lever, locking him in, then you can encrust all you want without worrying random stuff that you don't want will be encrusted. When you're done, pull the lever again, the door opens, and you can refresh the stockpiles.
Depending on your attention span, you may want to include a bed and a small food/drink stockpile, just in case you forget about your jeweler for a few years (learn from my mistakes!).
If you don't mind more micro, but still want to be absolutely sure that you only encrust what you want, you could put a hole in the roof of this sweatshop, dump in goods to be encrusted, gems to encrust with and food/drink. Reclaim it and when you're done with the encrusting, dump the finished goods out a hole in the floor and reclaim it. This way your poor jeweler cannot possibly encrust anything but what you want, and, bonus, he's protected from the hammerer (and any social interaction, and freedom, but what does a dwarf need with those?)