Not sure if 125 oz-in is enough torque. It should work ok but I don't know how it will cut aluminum... I'd personally look for the steppers in 200-250 oz-in range. But with your ballscrews the less-beefier stepper might work fine though.
I'd leave encoders out for now. Once you make your machine you can always connect them afterwards. It's better to move in small steps. Encoders set-up is just another hassle right now.
Kress spindles are good. Look at their new 1050FME that can go down to 5000 RPM. Especially if you're planning to machine metals. You'll desperately need low RPMs for metals! The only disadvantage of new 1050 is that its maximum is 25000 RPM which might be too slow for engraving some materials. The old 1050 can do from 8000 to 32000 RPMs, so you have to choose which one you want.
Note though, that Kress officially doesn't recommend its router for metals, but mine is working just fine
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