I have access to heavy duty equipment so drilling the shaft is not a big deal. My concern is the electronic part that I'm not really good at. You mentioned paint the shaft, and probably is an option, but how can I pick the signal.
Do you think if I paint the shaft and put the emiter and receiver next to each other is going to work? But like a said. I'm more concern about how to connect the LED's to the arduino than the mechanical part.