Hood,
We don't disagree on how the systems operate. I completely understand how your system (and actually any servo system using Mach3) functions and as I said, I consider it acceptable as a practical matter for my purposes.
What makes an interesting debate is your comment:
"Mach does not need to know what is happening for my machine to be closed loop." What we may agree to disagree on is simply a question of symantics in what constitutes 'Closed loop'. One way to think about it is that in the case of Mach3 and servo motors, the loop is only 'closed' back to the servo drives (amplifiers?), and not all the way back to Mach. That arrangement precludes certain functions to take place. Whether those functions are usefull or neccessary is another legitimate debate, but the fact that the 'loop' does not reach all the way back to Mach is not debatable, unless one was to argue that a simple fault constitutes a 'control loop'.
I will agree with Webster's definition of 'closed loop'
Main Entry: closed loop
Function: noun
Date: 1951
: an automatic control system in which an operation, process, or mechanism is regulated by feedback I made no implication that proper sizing or tuning of the motors had anything to do with defining what constitutes feedback.
Speaking of tuning, I do not own a scope nor do I know anyone who owns a scope, but Gecko has a method of tuning that uses a volt meter. NOt as good as a scops, they say, but adequate. They ship my new drive and motor today so it won't be long till I can resume frying electronic components again . .

Incidentally, my understanding is that the Geckodrive is fixed at 128 steps befor faulting. Your setup is obviously quite a bit tighter . . and tight is good
