Thanks to everyone who commented with ideas, data points, and URLs.
Dave, The reason I thought I might need a potentiometer was to scale down the speed signal if I attach the sensor to something that rotates faster than an automotive drive shaft. I have used sensor coils before that "read" the teeth on the flywheel and would give a number of pulses equal to the engine rpm times the number of teeth on the ring gear. A bit faster than getting one or even two per rev on a driveshaft. I should't have too much difficulty doing the simple analog signal conditioning, whatever it is. Buried in the archives of my checkered past is several years experience in electronic engineering.
The reason governors oscillate (over rev/under rev/over rev...repeat and if you are lucky damp out) is that loop gain (sensitivity) is important to making the unit respond to small changes in speed (small error conditions). Dampening helps control oscillation but too much and the system response is too slow.
WARNING!!! Brief Lecture follows: There are three possible conditions in a system like this (just like with car suspension's springs and shocks) 1. Over damping, 2. Under damping, and 3. Critical damping. With a car, when you push the bumper way down and turn lose it will, if critically damped, rise past its initial/rest position and then return to the rest position AND STOP. If it is under damped it will exhibit damped oscillations, i.e. it will swing up and down up and down with each swing smaller in amplitude until it comes to rest in its initial position. 3. If it is over damped it will return to ins initial position but no further. You can tell the guys driving on worn out shocks (under damped) they go bouncy bouncy every time their suspension is disturbed.
What has this to do with governors? When equilibrium is disturbed, load increases or decreases, the governor needs to change the throttle to compensate. There is a delay and the error in RPM grows a bit before the governor can respond and the engine can respond to the change in throttle (total system response) If the system is too sensitive (too much gain) and not damped enough it will respond real quick but will overshoot and oscillate a bit or a lot, depending on the situation), either in adding or reducing power.
If there is too little gain the governor under reacts to the need and either doesn't add enough or reduce enough depending on the situation. There is a delicate balancing act between gain and damping and it is difficult to get it just right over a wide dynamic range of conditions. Some cars use variable orifice technology in their shocks which lets the computer control damping.
Electronic controls can more easily be designed to prevent throttle induced RPM oscillation but there are limits to what can be easily done. When I drive through "rollercoaster" type road conditions, my truck's cruise is totally inadequate and gets way out of phase with reality. As speed builds up going downhill it retards the throttle and as I head up the next hill it has a lot more throttle movement to make to catch up and doesn't. Speed falls way off and it goes to max throttle as I head down the next hill, over speed and throttle reduction follows. Even a mediocre driver can do a lot better job because the human-in-the-loop "anticipates" the need to make a correction. An inexpensive autopilot I had once on a tiller steered sailboat would "lose it" so bad that you'd have to turn it off, straighten the boat out, and turn it back on (I did a little remedial engineering and it got way better).
Properly designed, an electronic governor will virtually never oscillate and it will still have a good response time (but you still have the engine's throttle response to deal with). It is nearly impossible to build a mechanical system that can come close to a good electronic system. I'm willing to settle for much less than perfection (I just want a bunch better than I have right now).
Hope this wasn't too boring. The last guy who asked me what time it was got a lecture on watch making.
Patrick
