If you actually need an encoder, then look in the first post on my build log as you can see in the photo the encoder I used and how I mounted it to the 24000rpm spindle:

http://www.mycncuk.com/threads/6484-...strong-machine

If you just want a measurement of the spindle speed, then fashioning a single pulse is probably easier. Be careful not to add anything which could imbalance the spindle...