I do have some dc motors and radial optical encoders, i wanted to make something cool out of. I was even considering using on for the z axis because it would have been a bit more powerful geared, only i was afraid i might not encase it properly and it could get dust, or chips inside of it, ruining the performance. Plus they would have required a much tighter latency requirement.
Thats not to say they wouldnt be useful in other applications.
My current plan is to go with arduino for the robot arm, and set parameters to govern the more comlex motions, down to a simple 8 button input sceme for my kids to play with. (foward, back, rotate left, right, up, down, grab,release.)
Kinda like a really cool claw machine game.
(plus the basic arduino controllers come with eight buttons, so seems to make sense to stick with what you can get lol.)