IR positioning

I want to be able to know the location of an object at a small space and the only solution I could find is this http://www.dfrobot.com/index.php?route=product/product&product_id=1088 I think of attaching an ir led on the object, what do you think about this??

I can't help, but I'm replying just so I'm in the thread: I want to see the answers.

Looks like a feasible solution though. Expensive?

It looks like they took the camera out of a Wiiremote. Nice, i have been searching for this a long time.. Your project certainly seems doable.