Rotate,
It is done quite often, but my opinion is that you are much better off retrofitting a CNC with an outdated control than trying to start from scratch from a manual machine.
For what 70's and 80's CNC go for these days, you will probably approach the same dollar amount by spending many hours making brackets and enclosures and drive belts and such, and buying your steppers/servos..etc.
Older CNC machines are already set up with all of that, and are tried and tested in their original configurations, not to mention that in many cases the machine iteself is specially designed for production CNC work (box ways, larger knee, ballscrews, etc.)
There are alot less steps, parts to buy, and pitfalls in this route and the end result can often be much better and still cost less than retrofitting a manual machine to CNC.
It is almost certain that either way, you will not being creating a machine with linear encoders for the positional feedback so where the control thinks the machine's position is, is dependant solely on where it *told* the steppers/servos to be.
The backlash compensation is done by the simple math of adding the known backlash to one direction of travel in the control and is done automatically by most software, however, the least true backlash will provide a better result especially when interpolating axes for contouring (imagine the motions of X and Y to make a circle in real time and how they would be effected by the softare telling one axis to "wait" while the other takes up the backlash when it reverses direction and then apply that to a more complex contouring job like making figure 8's or carving a human face).
You could also equate it to trying to sign your name with a pencil that is half broken and doesnt follow your fingers until you've traveled a bit more then normal.
Sean