Stan:
Your video is most convincing. I wasn't sure if the magnetic field would spread laterally and affect the other sensors but this puts that to rest.
I'm also curious as to the use of hall effect sensors. There are linear and latching types and apparently they can be oriented in several different ways. I know they are used for tachometer applications and are very responsive. But I couldn't find anything about operating them side by side as you propose to do.
I thought about the digital encoding technique a few days before you posted your idea on this and like you thought that it might work with reflective tape and photo-transistors. Some folks think alike. I believe your current proposal is well founded and already good enough for engine identification.
I look forward to more on this topic. Nicely done!