Thanks for the replies!
@mem
The more I read the data sheets for the mouse sensors the more I want to use them, but there are a few problems that come up.
The first problem is the spectrum that the CMOS sensors are calibrated for. I had an IR optical mouse from Logitech for a couple years but I had to toss it because I broke the RF receiver for it and unfortunately now I can't open it up and see what sensor they were using. >.< However, as far as the Avago sensors go, they just barely can see IR, mostly picking up visible light peaking around 600nm. This doesn't rule out using the sensor though. A simple fix for this is some Rosco Roscolux #27 (Medium Red 360-580nm) and #74 (Night Blue 540-660) filter paper. I'm sure I can find some other film that will block out the rest up to 750nm or up to the frequency I used for FTIR.
The second problem is the depth needed to focus the sensors on a given area. The whole idea for this project is to get the sensors to be as slim as possible so that it wouldn't make and LCD monitor much thicker than it already is. However if I took the time to calculate some of the light physics I'm sure I'd find the focusing point to were the sensor picks up just as much space as it's foot print, still there would be more depth taken up by the CMOS sensors than a photodiode. The down side to the PD array is that the resolution is not as great.
The point I guess I'm getting at is that there are trade-offs for either scenario.
@leahb
Correct, my idea did involve considering each photodiode's (or CMOS) return value a pixel (pixel array if CMOS is used) that is between back and white. Thus the array would make a 2D image that can be processed.
Could you point me in a direction to where I could learn more about multiplexing with Arduino?
Thanks! 