The main advantage of using high resolution encoders is not so you can command a 0.000001" move, it is so the servo drive has fine granularity in velocity term, allowing the motor to run smoother, quieter, and more accurately. Just figure out how small you want your smallest move, usually 0.0001", then determine out how fast you will go at whatever step rate you can run at. So Mach can run 0.0001" granularity with 25Khz at 150in/min which is good enough for any home machine. 100Khz will get you 600in/min. So I do not think the smoothstepper is even close to necessary for a good and fast machine. Just make sure you have a modern PC, and don't play videos while machining if you play with 100khz. However, these days, most PC's do not have parrallel ports...so the smoothstepper may be in your future after all

My 2c