Sounds like an interesting project.
First let's define the axes; Z is the carriage and X is the cross slide. The -Z direction is towards the the headstock. -X is towards the lathe centerline.
Yes, most modern DRO scales will output a signal that is compatible with an encoder input on most controlling devices.
In order to cut a taper you would have to electronically gear the X and Z axes together. In this case Z would be the master axis, and X the slave. So some number of Z encoder pulses would move the X axis some number of steps based on the desired taper angle.
It is possible to drive the stepper drive directly from the encoder output through a selectable counter network to do the gearing math. 3 or 4 decade counters would do I think. A step up from that would be some microprocessor like an Arduino that would be programmable. The next step up would be a Galil motion controller that has electronic gearing built in, available relatively cheap on Ebay.
So the required hardware would be:
A stepper motor
A stepper driver
Stepper power supply
Linear Encoder (DRO scale)
Some type of computational device.
Now that you have gone that far, you may as well add the second stepper and driver and make a real CNC out of it.
In that case as
@British Steel says Mach3 or LinuxCNC would be good options.