You can find pretty cheap resolvers on eBay (I have a couple of Singer units that I paid $30 for). I'm sure you can also find LVDTs. Resolvers & LVDTs only differ by motion type: resolvers are rotary and LVDTs are translational.

At least that way you don't have to do the "annoying" part of the project, which is likely to be the mechanical aspects of winding and placing the coils.

I built a product that basically simulates the process: it takes an analog or digital input and outputs sine & cosine signals that look like position information for a motion controller that expects an LVDT or resolver.