Ii have done lots of stuff with servos. In fact, I almost never use steppers if I can get away with it.
Skip the geckos, I have used them and they suck. I would look at the Whale3 drives. One thing is you tune via USB so no scope needed. A good review here:http://www.thecubestudio.com/ServoDriveReview.htm
Linear encoders may not work very well. The problem is you need a very, very stiff system to use them. This means preloaded ball bearing linear guides and probably ball screws or a very tight belt drive. Any lost motion in the system can cause tuning issues and lack of performance. My cnc mill was originally set up like this and it severely limited the performance of the machine because of backlash in the ball screws. I am using linear encoders on mine but I have gone though and am going though a lot of effort to stiffen everything.
Putting encoders on the motors themselves is usually the best bet. Don't worry about having too big of a motor, well, unless these things are really massive. Disadvantages of a too big motor is an inertial mismatch between the motor and the load which can make it more difficult to tune. It can also lower the accel and decel times since the mass of the armature is just that much more and you will be moving one of the motors on it's axis.