A reed switch and a magnet is probably the easiest route, trying to remove and ream out that ferrite magnet will almost surely result in magnet pieces on your workbench.
IF that's a once-per-revolution magnet/sensor seems you could use a Neodymium (Nd) cylinder type magnet which come in quite small sizes. Then you wouldn't have to pull the wheel off the axle. Just clamp two half-circles of your nylon round around the axle and insert the Nd cylinder like a set-screw.
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