Summary

I tested every design that I could find to use for a direct drive hot end system. This one had the most promise. It is simple and easy to use. I modified it to reduce the number of parts and allow it to be mounted hanging from an overhead feeder. The bowden tube must reach the direct drive system and not allow any slack to correctly monitor the feeding.

Please refer to the original design for more information on the design and parts.
I printed the ring encoder with ABS or PLA on the bottom and top and TPU in the middle section to grip the filament. You could use the original with a rubber band.

Here is the link to BTT github that shows the settings to change
https://github.com/bigtreetech/smart-filament-detection-module/commit/592acd7eb9f00a28721916a962bfbbded31b1b85

Here is the design I used to mount the sensor. I'm asking for permission to post the changes that I made. https://www.thingiverse.com/thing:3837979

A video of the complete system in action.
https://www.youtube.com/watch?v=alWxm-p9sr4&ab_channel=DavidWilson