I would watch out that you do not go for too high a ppr count - it would be easy to hit the limits of the motion controller with too high a pulse rate. I think that my controller suggested 100ppr which still gives a very good speed feedback for accurate threading. Muzzer also makes the important point that you really need the index pulse as well - look for an encoder that offer "ABZ" outputs where AB are the high-speed pulses and Z is the once-per-rev index pulse.