gecko servo drive +5tpi screw?

someone posted before,that for a servo system to work ok the
resolution should be 10x the needed resolution.
I've being thinking in upgrade my grizzly to servos using the gecko
servo drive and 500 lines encoder + a 5tpi screw,that would give me a
resolution of 0.0001" Would it work ok? or should I get a more
expenssive encoder(1000 lines).
0.0001" is the target resolution.