First of all, threading IS possible. I do lots of it.
Yes, you need "use spindle feedback in sync mode". I also use 'spindle averaging', although I am not sure whether that is needed or not.
At one stage, after rebuilding the entire electronics, i found I could not thread any more. That was a puzzle. Eventually I found that the software filter inside Mach was set far too long, so the sync pulses were being filtered out. I killed the filter down to zero and all was well.
To explain: with a typical encoder on the spindle motor the Index pulse is very narrow, and easy to lose. If you make your own Index pulse using an optical interruptor and a small disk with a slot, you can make the slot much wider.
At another stage I found that the Index pulse line was being loaded too much and the pulse was dropping in amplitude. That meant the ESS did not register it all the time. Fixing that might require a bit of electronics and a CRO.
Cheers
Roger