Ken,
I ended up doing this for my X-5 unit and it seemed to make a big difference. I was finding that the unit was doing a lot of "hunting" before I installed the rudder reference unit and now it seems to keep a course a lot better. I know the designed the X-5 to work without a rudder reference unit, but in my experience whatever they thought the gyro would do to make up for not having this input it did not do.
It's a bit of work to install it, had to fabricate a place for the unit to sit and drill a few holes to attach the unit to the rudder arm, but it was well worth the work. Now my system works great and always knows where the rudder is pointed. Basically in my mind the more information the X-5 system has about everything (rudder, heel, heading, etc) the better it will steer the boat.
Take care,
-Levin