Hi,
I once worked on a midi to paper tape coder (for a paper tape controlled pipe organ)
I got stuck when thinking about the mechanics.
So your main obstacles are the code of the tape (which as I read the thread is not the problem) but the mechanics like how and how fast and stable can you move the tape.
Since I don't know the kind of tape as some of the oldtimers do(sorry guys 
i am only able to estimate a possible solution.
As a detector there is
- the IR or VisLight bridge (LED and Photodetetctor)
- or a real probe (sensor) (metall surface and a metall probe which connects through a hole or not)
You could use printer mechanics to move the tape.
Older matrix pin printer have an easily accessible roll which is controlled by a stepper motor.
You could controll the advance speed of the tape by stepping the motor via the ATMega (or whatever µC) you are using.
This should give a quite stable speed and movement
This might not necessarily fast so the data reading has ample of time to stabilize.
Then "only" the sensor is left as a çhallenge
rgds
Martin