There is a video of a earlier version of the Rugbot 1000 in the show your stuff category. I have changed the stitching mechanism to a needle and blade system which I hacked out of a cheap commercially available tufting gun. What happens is the hollow needle enters the fabric first and opens up a space where the blade can then push the yarn though the opening, the needle retracts, the fabric grips the yarn and the blade retracts. The servo that runs the mechanism runs at a velocity that is calculated by a "hypot" components that is reading the X & Y motion to calculate the rate of movement. I can control the stitches per inch by setting the scale on stepgen for the servo, which is not an axis. It works fabulous and gives me perfectly even stitches at all speeds and directions. From a LCNC perspective it is open loop but the servo drive closes the loop internally. I had to use a servo because the speed and torgue of steppers didn't work for the speed range I needed which is currently about 300 stitches per minute, at 5mm per stitch and a 2:1 belt reduction.
The current problem is that when the needle mechanism stops, either at the end of a path or by pausing to fix something, there is no telling if the needle or the blade are going to be forward. If the hollow needle is forward I can move the carriage back to the fabric an all is fine. If the blade is forward of the needle it will catch on the fabric and cause problems. What would be nice is to "jog" the servo to get the needle ahead of the blade to get going again. Since starting this thread I have found a mechanical binding in the mechanism that makes it hard to manually rotate the servo when the carriage is retracted so fixing the binding may be sufficient. When the carriage is retracted it hits a switch that disables the servo.
I have also though about researching sub routines similar to ATC and adding a sensor to the mechanism so that at the end of a run it will automatically "jog" the needle to the correct orientation.
I will try to post a short video of the current mechanism which is a little Rube Goldberg but fun to watch and it actually works for the most part.