I took apart a cheap set of digital calipers a couple days ago. They used a mechanical (rotational) encoder connected to a DRO.

I appologize about the confusion of "cost is no option". When brainstorming, I prefer to throw out cost. However, when looking at the different methods, obviuosly, one must consider the cost.

Just FYI, I think it's going to be critical that we seal up the motortransducer from the wet environment. And if that's the case, I think a mechanical encoder is probably the optimal technology for this device. Thanks for all the ideas and discussion. It really helped!

Bruce