Talk:CEB Press/Manufacturing Instructions/Controller Box/Arduino Control of CEB Prototype 2
Have you guys considered a couple of inductive linear encoders?
They aren't too difficult to build from scratch, and I think an Arduino could easily run two of them, as well as the solenoids.
Edit: Hackaday just linked to a homebrew project to build just such a sensor, from which I now know that the name I was searching for is "Linear Variable Differential Transformer." Enjoy!