I did exactly that with a Ford 36-1 crank target wheel. I bored the center of the wheel out to slip over the FE crank, and then put a keyway in it so that it would index on the key in the crank. Then I cut the crank spacer in half and machined down one side the thickness of the target wheel, and put it all together. I used a ZF position sensor, and made a bracket for that to hold it next to the target.
I wouldn't do it again this way though, and here's why. The diameter of the Ford crank target is smaller than the diameter of the harmonic balancer. In the limited space between the harmonic balancer and the front cover, it was very difficult to get in there and measure an accurate airgap between the sensor and the target. When the engine is all assembled and in the car, you just can't get in there easily to check that, in case you are having some problems. Plus, if you have to remove the sensor and replace it, re-setting the airgap is difficult. Since that experience I've gone to an external target that bolts onto the front of the harmonic balancer, and is bigger in diameter than the harmonic balancer. My targets are 3/8" thick so that all the pulleys are spaced out that much, but usually this isn't a big issue. My targets are also larger in diameter than the balancer at 8", so everything is easily accessible.
You might be able to fit a larger diameter target between the harmonic balancer and the timing cover, but you'd have to build a custom timing pointer to clear it.
