linear scales as encoders?

Hi everybody!

I've being away for sometime (working on the ballscrews conversion
for the minimill).
The ISEL ballscrews works great,I've got the x and y axis donne,and
next week will work on Z axis.
Question:I'm getting exited about servo drivers(99 bucks sounds
good)What if one uses a linear scale as a encoder? instead of having
the encoder right at the motor shaft?I think it would give a better
positioning of the table itself instead of the error associated with
lead accuracy,backlash,elastic deformation, or belt drive error.
or on the worst case,if there is a timing belt drive,to connect the
encoder to the lead screw shaft,not on the motor shaft itself?(this
way errors on timing belt (as backlash) would not interfere on
possitioning.
I'm driving the minimill with 100oz motors 1/2 step direct coupled
and it works just finne.No,no backlash yet! just need some more
adjustments,like alignament of the ballscrews and it is ready to rock.
Resolution is about 0.0005" (about becouse the screws are metric
wich gives aprox> 0.198" lead) using 1/2 step,if ones drive it with a
1/4 driver than it would be 0.00025" resolution(not bad ahhhh)