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I think it is safe to say that if it is to steer the boat, it needs to have some control over where the tiller is.
What setup were you thinking of doing, or of risking (as one might say, if your better judgment wasn't quite sure about it and that's why you're asking) ?
It would be a good idea to have the position sensor, for feedback as to how the steering is going. Pretty much necessary, yes.
The older system may have not had such a thing, and if it had no feedback from the rudder position, it just was roughing it along. The new autopilot will do much better with it.
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