The idea of using an Arduino to do the work is what got me thinking. In my mind, I was stuck on the idea of needing a mechanical linkage. I saw one design where a person used a flex shaft tied to a pulley on the spindle, into some more gears to drive an indexing head. I was really stuck on the mechanical synchronization. Even in considering how to make my own hobbing machine, I was thinking mechanical synchronization. This is far easier, and given they make 5000 ppr in quadrature servo encoders (and I'm guessing the likes of Mitutoyo have even higher precision encoders), its probably able to be more accurate (given all the backlash in the various gear trains needed for a hobbing machine).
I've since learned of polygonal turning (which is cool, but not really useful to me), and seen that CNC hobbing machines are doing something similar (though probably with FPGAs, and even fancier algorithms). Its really funny because professionally, I'm a software engineer. I should see my favorite hammer (software) and see nails everywhere!
Either way, I'm pretty excited for this. I hadn't started updating my designs for the gears, because I really didn't want to spend $2k+ on gears! If I couldn't find a way to make them, I was going to really try hard to design around them (probably would have done chains with sprockets made on the lathe, but chains are noisy....and my project is a jerk, err, has a lot of jerk....Its going to be hard enough on gears. Chain stretching would likely have become a major issue as well.
I'm now working on the design changes
I admit, despite having nice equipment, I'm still a relative newbie with it all. Despite that, if you ever have need of something made, just ask. I'll do my best. Trouble with CNC is that there are billions of ways to get the machine to destroy itself. Inventor HSM simulation isn't very good either, and vericut is rather expensive. (Still considering it anyhow), so that why I say, I'll try. To give you an idea of the capabilities, its a Haas VF-2 with a TR-160 or HRT-160, and a Haas ST-20Y. Pretty good work volumes for hobby/research/prototyping, but as far as "industry" is concerned, they're small machines