Thank you Erik. I will try the options suggested by you.

Read rate requirement :

position transducer moves 200mm/sec maximum distance is 1000mm. i want a resolution of 0.1mm. So, 200/0.1 = 2000 reads per second. so it is not possible to reduce that.

I, now feel pessimistic on using 8051 for this application, because of the speed requirement.

Haribabu