ikalogic.com just finished IKA-TACH project which is a contactless Tachometer based on ATMEGA48 AVR micro controller. Detection of rotation is done using a IR transmitter / receiver module. There is also a red led that helps point the invisible IR led. This tachometer is able to measure both low RPM speed and high RPM speed. Check construction details and KIT on the link below.
IKA-TACH: DIY Contactless Tachometer - [Link]