Hmm... very interesting. I've always wondered about setting up a pendant.
One thing I'm curious about - if I read the .hal correctly you're using digital inputs 4 through 10 for the pendant. My USC is set up using ports 4,5,6 for the Y switches and 8,9,10 for the Z switches and I remember that I had to use specific ports for the - limit,+ limit and the home switch on each axis. Was that just under EMC1? (I'm running EMC2 now)
I have a very simple understanding of the .hal file but to set this up basically I just need to send the AB output of an encoder to a couple of digital inputs and wire in a few switches. There really isn't any additional circuitry needed. It's all very simple to do (now that you've provided the .hal file). Is there any additional circuitry?
Any suggestions on what resolution encoder to use?