When I steer my boat upwind I use the tell tales in the Jib to keep a constant angle to the wind. To feed this info into the Arudino, my idea is to place the wind vane about a meter in front of the Jib, and a meter above the water, to get clear wind.Mast top wind vanes is disturbed by heeling back and forth, wind turbulence going upward along the sail, etc etc. With a good filtering on the wind vane, I hope to get a stable reading, that can make the Arduino steer better upwind than I can. After all, all I do is look at the tell tales and counter steer. A computer just got to be able to do that better!
I don't think I have the knowledge to build a mechanical wind steer system. Its going on a small dinghy as well, which makes it even harder.