Sherline, TouchDRO : mechanical
After researching encoders, I decided on the AMT-102 from CUI. I've been impressed with its performance and its price tag; cheaper than other rotary encoders and cost competitive with slide-based digital scales.
With no part of the lead screw easily exposed, mounting the AMT-102 required some modification of each axis but no machining of any new fixtures or adapters. It's just adaptation of the existing parts. Since I was using my machines to make the modifications, I picked up an extra set of bushings for about $35 from Sherline. Each needed two, #4-40 holes drilled and tapped, equally spaced from the bushing's center. Some of the bushings, specifically the ones on the x and y axes of the mill and the cross slide, are made of steel that required cobalt tooling. With the backing mounted, the other side of the encoder snaps in place.
Note: I modified this configuration slightly and I would now recommend mounting the encoders at 45° or even parallel to the axis so that there is more clearance for and less strain on the cable.
Second step was modifying the hand wheels so that they engaged the encoders spline directly without using any of the adapters. While it is likely possible to disassemble the zero-set hand wheels that came with my machines, it was easier to buy a new set. Often there are people selling theirs on ebay after they've upgraded to the zero-set or an upgrad to CNC. It turned out to be easier to order directly form Sherline as you can buy the wheels without the handles (34010, 42040 and 42080). If you have hand wheels with handles, they are press fit into wheel and I used my drill press and a old drill bit, i was able to push out the pin from the reverse side without too much trouble.
With the handles out, I reversed the jaws on my chuck and reduced the diameter of the handwheel's throat to 0.47" (or just under). Moved the chuck from lathe directly on to the vertically mounted rotary table. The encoder's spline width is within a couple thousands wider than a 3/32" end mill. Wasn't comfortable taking the entire depth of each groove on the spline in one pass, so I cycled three revolutions on the rotary table, stopping every 45° to create the matching grooves (there are 8 teeth on the spline).
Milling the splines:
Hand wheel with reduced diameter and then after the spline had been cut:
The hand wheel's splines mated to the encoder:
The final step was to add handles back to the wheels. Press fitting the original handle back into the wheel was doable, but I opted to create a threaded replacement spindle and handle. And instead of reusing the existing, I drilled and tapped a new hole. This also allowed me to have a single design for both small and large hand wheels. Tapping turned out to be a little tricky due to the thinness of the wheel; there wasn't enough depth to keep the tap perpendicular to the wheel. It required a T-handled tap holder and a center point inserted into the mill headstock to keep everything aligned.
Mounting of the tachometer with a #4-40 screw and a inkject printed disc with line (adhered with some rubber cement):