I have an idea, this was used in a weighing cell of a precision weight, but it might be usable for this case too.
The thing used a closed loop system, made of a pair of photodiodes and a solenoid. The solenoid acted as feedback trying to get the needle right in the middle between the two photodiodes. You will have trouble making such system mechanically stable, but it might work for you.
Just one thing, how does the assembly look like from mechanical point of view, are you able to "watch" some reference points attached to floor, or does this need to be standalone?