It is possible to do any lathe operation without ball screws. But you do need mechanical backlash compensation to pull that off. I won't go into the details here, but it's possible to do it at relatively low cost.
The least cost and easiest method is to use a timing belt drive to the spindle encoder. You just bore a timing belt pulley to the OD of the spindle and attach it. Then use the same size pulley on the encoder. There are a few more ways to do this also.2) What kind of spindle encoder should I be looking for? I can't connect anything to a shaft, because the lathe spindle is a gigantic hole. Is there a simple approach and a readily available optical/magnet sensor that I can employ?
With any CNC you can set the work zero to anywhere you want.3) assuming I can create a reliable zero where i can start and end the CNC, is it reasonable to assume that I could do manual operations by removing the belts? or should I anticipate that i'll need to either (a) get good at Intercon or (b) do turning operations using the MPG? I've been told I "can't do manual turning using the MPG", but some folks are just biased. but maybe without using ball screws that's true?
I don't know what ''intercon'' is.
It is possible to do some simple turning using a MPG. I do that occasionally on my CNC lathe. But for profiling shapes or anything that requires more than a 1 axis move is pretty much impossible.
Yes, it's possible. But rather than using the lead screw, I would use the rack & pinion that most lathes have on the Z axis. Again you would have to provide mechanical backlash compensation.4) As a worst-case scenario, is it safe to assume that if nothing else I could do profiling with a belt+leadscrew setup? That alone would be worth the effort for me. It takes me two hours to shape a pen, sometimes more.
Starting with a manual 10x22 and then doing a full CNC conversion would not be my first choice. If you want a CNC lathe, then just simply buying one would be my first choice. Most would require a controls retrofit, but that is normally the cheap part. At least you would be starting with a machine that has all of the expensive bits installed and is a much more substantial machine to start with. A Hardinge CHNC would be a perfect size for what you are doing. These are available on eBay from about $1000 and up. There are many other options available also. If you can find an EMCO CNC lathe that be a good option also for your required work envelope, very nice machines. A quick search of eBay shows them from about $800 and up.