The LED in Mach is of no concern, the refresh rate of the grapgics will be causing that.
What to suggest I dont know, I seem to see more people that have problems use the C3 but that may just be coincidence seeing as likely there are a lot sold.
The ESS should do excellent threading so I am suspecting it is the signal.
What version of Mach do you have? Also is it a licensed version of Mach as Demo (and Pirate ones) dont do threading.
Hood

Threading is different, it is done in the driver and feedrate is altered with respect to the spindle speed. The more steady your spindle is the better your threading will work but it will follow increases or decreases of spindle speed, within reason.

fwiiw, I do a lot of threading and find it quite reliable.

Cheers

Hello all,
I'm new to the CNC world and in the process of building a machine with a 2.2kw, water cooled motor and VFD. My background is a controls and VFD drive engineer. Some of the problem posted by spencyg could be related to interference from improperly grounded or no shielded motor t-lead cable. I see this situation all the time with customers. Improperly or no grounding can cause havoc with electronics caused by VFD output inductive noise.

Using a VFD requires shielded motor cable which is specially designed for this application. Igus, Belden and several other to name a few make shielded flexible t-lead. All shielded cables must be grounded to a central point and only on one end. Never daisy chain ground connections from one device to another - use individual ground runs back to a central point.  

Do not ground the shield at both ends of the cables, this creates a secondary path for voltage ground looping through the equipment frame work. And always avoid running motor lead (AC) cable next to and parallel to low voltage (DC) signal cables.

Hope this helps...

Thanks for.the, comments all. I would agree with potential noise from the vfd but i have taken special care to isolate thee vfd and index leads. The motor power wires are not grounded however so I suppose I could  look into this. What other options should I look into for an alternate to the C3 board? What is the most robust index.pulse solution out there? I'm not abig circuit board soldering guy so a canned solution would be preferable. In the mean time I'll see what options I got on the motor shielding front. Thanks all.

I always got good results from an Optek OPB 916B or 917B
The only other thing you need with that is  a resistor to limit the current to the optos LED, I used 220 Ohm when using a 5v supply.
Hood

I thought about the refresh of graphics now allowing the LED to keep up. This would make sense to me if I was dropping visual index pulses @ 1000+ RPM but even when turning it by hand at maybe 40 RPM I lose LED pulses on the diagnostics page. I'll get the "tick tick tick blank tick blank tick tick tick". At 500RPM I can see the LED's on the C3 and C32 flickering at approx. 8-9hz...clearly visible. The Mach LED's should be able to display consistently at these low frequencies but they are not. I'm headed out now to check out the circuit with the scope and will report back.

There are quite a few dfferent things at play, first is the refresh rate of the screen then the update rate of Mach, Plugin update as well so a missing LED is nothing to be concerned about.
Using the scope is a good idea, it may show something up.
Hood

http://www.youtube.com/watch?v=eCZo9f5JKRg

Have a look at this folks and let me know what you think. My only thought is the timing pulse disc might need some tweaking on the slot timing.

Use a one slot disc and set the ratio in spindle pulleys.
Hood

Oh and regarding the LED, Machs refresh at the moment (Mach3) is 10Hz your rpm means your index is roughly 13Hz so intermittent LED is to be expected.
When using an external controller the pulse will be seen no problem by it. When using the parallel port the driver will see the pulse no problem (as long as its wide enough) But the screen LED in either case will not show the LED correctly.
Hood