Thanks for the info Rylan. I should have some time coming up to try some further experimentation. I'm getting 50-100pF. I think to be able to use reasonable levels of resistance I will need some wider foil tape. or perhaps to spray the entire jar with metallic paint.

Right now with 1Mohm, I think I'm going to get a 170-230uS charge time from 6-11cm (my test range), which may not give the best precision even with an arduino. I've used them for uS level timing before, when I made a flash trigger for high speed photos. I was able to get some shots of bullets mid air, etc. but even if I can measure down to the individual microsecond, that sill gives me maybe 60 steps for 5 cm of travel, which is ~0.8mm resolution.

I may try multiple strips of tape, not overlapped, electrically bridged, or just tape one strip, paint the whole jar with metallic paint, and then peel off the strip as a window.

I have a lot of projects going on right now, so it might be a few days.