From what I know, there is no way to directly move the z axis with an input of button while it is running g-code.
I believe encoders send out pulses not proportional analog signals like 0 to 10v.
The linear wire encoders i believe they do not use encoders, just pots that divide a voltage, yes you could use something like that as an analog input and manipulate that value trough a brain or something like that. But a linear pot would have to be used with a "feeler" or foot that is always touching the surface of your material, If you can already tap the voltage of your plasma and translate that into a 0 to 10v signal, then the lienar pot would be redundant. You would really want to use that arc voltage as a reference since it is what really matters in the plasma process.
I have not tried the THC plugin that Brian wrote to accept an analog signal, you would have to ask him, but since in the description it says experimental-unsopported, i would believe it is not finished and would lack some features needed like arc dive and stuff like that. and since it is unsupported, i guess no changes will be made to it if requested.
Again, im no expert on this since i have never used plasma, torch height control or any type of analog signal control, im just calling it on the information I have read on this forum..
Best regards
Fernando