Yes some sort of angular velocity sensing is required for the spindle.

Quote Originally Posted by swarf-boy View Post
I suspect that the spindle needs some kind of rotation sensor, but would that be simply to sense RPM or would it need to be more along the lines of a full rotary encoder of some type, so that MACH3 knows the exact rotational position.
Unfortunately Mach3 apparently only works with 1 pulse per revolution sensors, which can work if the spindle inertia is high (i.e. big lathe), or the length of the thread is short. However LinuxCNC supports sensors with many pulses per revolution - it's limited more by the interface (parallel port generally), not the software.

The sensor needn't be anything complicated. Position an infra-red LED and detector either side of a disk with slot(s) in it attached to the spindle, and wire it up to one of the inputs on your controller.