When you say full blown glass linear scales, that's what most of your Chinesium scales are these days. I have several sets, for my smaller mill and my lathe. They are both single ended TTL output, which is what the CNCdrive servos are looking for - I have those drives on my Shizuoka, so I'm familiar with them. They would certainly connect up OK but whether they'd be happy driving an old machine with backlash would remain to be seen.

The accuracy is down to what you want to pay. I think mine are the basic 5um ones from HXX in Shenzhen but you can get resolution down to 0.1um from them and others.

It's possible that high end ones might have differential outputs which are more noise immune, in which case you'd need a line driver to TTL converter.

Whatever encoder you end up with, the driver needs to know how many pulses per rev. This will be a function of the ballscrew pitch, belt reduction ratio and linear encoder resolution but the sums are very simple.