I'd go with the timing belt system; it seems easier to build, and like you say, it leaves the bore unobstructed. It seems like you should have resolution to spare. It's not going to go very fast, but you're not using it as a lathe. The chuck seems a little large - I'd wait until I'd mounted the 4th axis to see how much clearance there was top and bottom before settling on a chuck. Remember, for 3D carving, the tool has to be able to reach the middle of the rotary axis and also clear the widest workpiece you mount in there, although if you're just engraving on the outside of a cylinder you can use a shorter tool.