Hi,
servos with encoders are certainly the way to go. I'm less certain that you need absolute encoders and more importantly a controller which closes the loop, it adds
cost and complexity which is not really required.

Most AC servos, such a s my preferred Delta B2 series, close the loop, but at the drive. That means that a simple (and cheap) Step/Dir motion control is all that is required.
The servo/drive closed loop response is all and every bit as good and in some cases better than a motion control that closes the loop. Should the servo ever become overloaded to the
extent that the servo cannot keep up it will error out 'following error', and in absence of that error you can be assured that the servo is within the (programmable) following error window.

Using servos of that description would allow you to replace the steppers, closed loop or otherwise, on a machine with a Step/Dir motion control like the AvidCNC.

Craig