what you want to do is a rather large project.
however, all projects do break down into bits and pieces.
the Arduino and touch screen are things you can go on-line and find how to do.
but, your description of your other work is a bit short on details.
if you use an encoder and a roller, you can measure height.
you can re-set for each new cut.
you can pre-set the distance, like radio-pre-select buttons in the car.
then as you lower your blade (band saw mill, right?) you can have a RED/YELLOW/GREEN led
as you get close, it goes to yellow, once on the correct setting it goes to green. to far, and back to yellow or red....
at these early stages, it is assumed you are not trying to set the cutting depth automatically ?
that might come at a later point, but to get into that, you need to have a lot more experience with the Arduino.
Since you are also running hydraulics, I assume your feed is also hydraulic
you should be able to monitor the feed speed. and report that.
blade temperature is also withing the possibilities.
as your programming skill and confidence grows, your can add quite a bit of information.
cutter feed rate
hydraulic fluid temperature
if you put in the width of the log, and note the feed rate, you might be able to predict blade sharpness.
if you put in log width and distance of cut, you can figure our board feet
hint, the feed rate at the end of cut changes as does load and blade speed.
There are many things you can work up to.
what is your first goal ?