Best linear position sensor for piston feedback
I'd use either an ultrasonic distance sensor/rangefinder or a parallax-based IR distance sensor.  

Both have a low accuracy, but if you only require 10% of 8"/203.2 mm, which equates to 0.8"/20.32 mm, they should be sufficient. Other disadvantages include susceptibility to ultrasonic/IR noise (both) and nonlinear output (mostly the IR sensor) which needs to be compensated for in software.

The advantages are low cost, easy availability, non-contact wear free operation, and absolute output.