I purchased the AMT102 encoder and attached it to my spindle motor shaft.
It has settable resolutions.
What will be the best option for using in this application? It seems that to get the best performance I should set this to the maximum of 2048 ppr.
Or should I go the other way and go with 48 ppr? Or anywhere in-between?

2048     1024     1000     800
512       500      400       384
256       250      200       192
125       100      96         48

Yes the best is the highest resolution.