Thanks for the replies ;D
Daniel --> from what i understand of servo motors, if they are hacked for continuous rotation, you loose the ability to accurately control the position. After the hack, the pulse controls direction and speed.... Is that right?? (I've never actually tried it.)
Michael --> thanks for all those details. The problem you are having is exactly why I would like a solution that takes the work away from the Arduino board.
Everyone! --> what I am really looking for is a system that handles the encoder off of the arduino board. So that the board's brain power is not being sucked up. Also, I would like a system like Arduino, ie, disposable!! (i'm a dreamer!)
Also, i'm still really interested to know if anyone has some experience of using the arduino motor shield.
Thanks again guys!