I'm thinking about using a capacitive touch screen (the touch layer only, no display) to detect the position of two moving parts. Each part would have its 'stylus' just above the screen to mark the position. Unfortunately, such a use-case would require a rather large (1.5cm hole in 7cm screen) hole in the middle of the touch screen.
Have you tried to drill a hole into a capacitive touch screen? Will it work afterwards?