If you are building a linear servo, can you not use a linear potentiometer such as the one listed in the following link directly at the output to measure the position?
http://www.panasonic.com/industrial/...OL0000CE13.pdf
For example, the 9mm stroke type has an overall dimension of 9mm X 16mm, not really tiny, but you might be able to reduce it even further by trimming it. What might be good is that you may not have to build any circuit, instead you might be able to use the circuit from any existing servo provided the resistance the linear potentiometer matches that of the pot in the servo.
Following along what Fred mentioned, if you chose to use switch type of sensors, can you use a sensor at the center as well? That way you can take the guess work out of the equation, and use the sensor to determine the center.
By the way Fred, did you use any sensor at all for you wheel loader steering mechanism? How does the model drive if the motor drives an open loop system with the operator acting as the feedback? I can understand why closed loop systems are better for larger models, but I am interested to know how such a system works at these scales.