I really like these; https://www.ebay.com/itm/5Pcs-TL-Q5M...QAAOSwbdpWUtNA
They are potted and do well with coolant. More importantly, they are fairly compact which helps with mounting on a small mill, though perhaps not as small as mechanical units. I get <.0005" repeatability, which is well below my backlash, so take that for what you will. It took a bit of experimenting to get there. I use mine with the targets running parallel to the sensor face, rather than moving towards or away from the sensor face. I just needed a nice square and flat target, so I've been using some steel angle for that. This is on a G0704.