Hi Barry,
Oh, only 8kHz PWM frequency....
If using the PCPWM timer with a 1:16 postscale it would interrupt at 8k/16=500Hz which, I'd say would be fairly good for a large inertia system like a lathe spindle. BUT, I think the limited resolution of your spindle encoder will present you with some issue if you're simply going to count pulses for the duration of interrupt period. At 500Hz interrupt rate and 60rpm there will be a single count every ~8th interrupt and none in between - even at 100Hz interrupt rate the resolution will be quite limited at the low end.

Still, this might work due to the high inertia but from the PID-filters point of view it's going to look like the spindle isn't moving at all, then all of a sudden it is moving, then it's not moving at all and so on. Depending on the tuning of the filter you're going to have a lot of ripple on the output which will result in some large torque variations in the motor - which will then get filtered by the inertia of system.

I'm thinking that perhaps it would be better to use a capture module and measure the width of each input pulse instead of counting them over time.

/Henrik.