The best sensors to use for this would be the hall effect style, that just sense whether there is metal nearby or not. I intend to (as in haven't yet) use one exactly as you describe, on the cam pulley. I'd like to mount it through from the back (nearby the valve cover), and count the holes/spokes. A hall effect sensor (usually) has a power, a ground, and a signal out. The signal out will be one pulse (high, as in +12v) for each metal tooth, or in this case, spoke. This would mean that we would get 6 pulses for every rotation of the cam, which would be the same as a 6 cylinder gasser (and _should_ drive a 6 cyl gasser tach). It would read 1.5X actual rpm on a 4 cyl tach, and I have no idea what it would do on the diesel tach. Since I want to turn 5000ish, I'd like a 6000 rpm range, which would work well with something like Meister's 9000 rpm tach face modification, if it were rescaled to 6000 on the face. What I have not done yet is actually tried driving a VW tach with a 12v square wave to make sure it behaves properly, or actually fitted the sensor to the backplate so that I know it fits. I will likely do one or both fairly soon, I just have to find a VSS that I think will fit and work, and a gas tach somewhere to play with. Anyone in the GVRD got a gas cluster to donate to the cause?
PS. the VSS has to be quite close to the steel to work effectively, on the order of 0.5mm, and the implications of having it catch in the pulley are UGLY, so mounting would require a little finesse, and I would NOT mount it through the plastic, as the plastic is not stable enough.
PPS If you are still reading this far, I am going to start another thread in the troubleshooting section to discuss some tach wierdness with my diesel tach, and I'd appreciate some advice.