There are good time of flight sensors that can detect up to 50m at 1.5mm of resolution and 10mm of linearity - thus getting away from the heat. if you have to have that close proximity there are special optical triangulation sensors fitted with special housings that can read .05 - 1mm in...
A magnetic solution is a good way to do this one - I have worked with a company that set up a great linear position system using a special tape they constructed and a very fine resolution linear magnetic sensor. you could add a wireless - zibsbee option for wireless or connect to the agv...
