Interesting about the stepper encoders not being absolute. Kind of a bummer actually... Does make a simple initialize function seem like the better way to go then.
Well there are industrial absolute encoders available and many would be no problem to wire up to an arduino, but their price can be pretty much a sticker shock. The fact that with one external sensor and one quadrature encoder, you can emulate a absolute encoder function in software, pretty much tells you which way you should proceed. As far as optical Vs magnetic encoders that is pretty much internal details of the encoder that doesn't much concern one, it's just a matter of the electrical interface method and getting the steps per revolution resolutions you require for your application. You might note that most encoders are specified as having X number of 'steps' per shaft rotation, but with standard software encoder decoding methods you can turn that into detection of X or 2X or 4X steps per shaft rotation. So a 100 SPR rated encoder you can resolve 100 or 200 or 400 counts per revolution just by the software decoding method used to decode the A and B encoder signals.
Lefty