Wow I didn't see this thread before...
I was working on the idea for a tougher, lighter "Dremel" tool, OR a milling spindle.
So far I've run into two notable problems: one, these BLDC motors are almost all designed for low voltages. It's hard to get a supply that provides like 40A @ 12v, and the wiring gauge required is awkward. PWM to reduce the power from a higher voltage source doesn't work well with higher ratios (big technical electrical thing there).
Two, for the Dremel-type handtool, getting low runout is a problem. There are no "shaft extenders" or machinist-type collets systems in this size that I could find. First off Dremel's collet system is horribly misdesigned on multiple fronts; it's not a matter of machining accuracy. Runout is BAD even for hand use. I found Proxxon collets WERE much better designed (3-jaw not 4, hardened steel, and long/deep chamfers), however, as of yet I'm still unable to make a low-runout spindle.
The primary problem seems to be that the collet's orientation is set by the nut. The nut is of course placed by threads, which can orient all over the place. I thought the Proxxon collets were different, but once I got the first attempt of a motor shaft off the lathe, I saw they were not. Also creating threads with a die was clearly an inaccurate process- sure, it tightened nicely. But the center of the threads, this the nut, thus the collet, thus the tool are macroscopically NOT coaxial with the shaft. Several degrees off. Want to get a lathe threading kit here.
I had considered getting a Dremel/Wecheer handpiece (normally used with a flex cable) and simply thrown a BLDC motor on back. However, this didn't give me the design flexibility to make the form I ultimately wanted, although I may do it anyways just to get something working.
Note this- the smaller the bearing, the easier it is to get high RPM.
Also check out BLDC boat motors. SOME HAVE WATER JACKETS! And/or you can get water-cooling jackets for them.