To express what Henrik said a bit differently, the device datasheet says the device output will change 2.05 V over the full temperature range. If you are able to match that perfectly with Vref, then you will have the maximum resolution possible, since the full scale of the encoder would exactly match the full swing of the source voltage. So if you are going to use a 10 bit ADC, it's simply not possible to get more than 2 mV accuracy, and with quantizing errors, and offset errors, 5 or 10 is more likely. Alternatives? There are some PICs with 12 bit ADC, or restrict the temperature range, or do something creative with op-amps and multiple pins.