MarkT, question for you what are your thoughts on a rotary magnetic encoder like magnetic encoder chip looks like it a really good candidate. It would be something that could be buried in epoxy during more finalized versions to completely seal it.
Since this would be for a throttle lever it will only be able to make a sweep of about 130* realistically. At 0.0879º = 4096 positions per revolution would give me 1479 steps for 130*. I think that would be a pretty good resolution.
The device also has internal error checking, so if the magnet was to fall off it will not update.
It also will provide an absolute position per 360* which i like for the fact that when first booted it would know where the handle is and be able to prevent direction control if the handle is in any other position then zero throttle.
EDIT* Found even better magnetic rotart encoder unit
Thoughts?