Interesting technique.
I use something similar. What you're doing is instead of measuring bearing angle change by rotating the periscope, you are letting the target pass the more accurate graduations on the scope itself to yield a more accurate measurement.
The only issue I see is that your own ship needs to be stationary.
What I do is stop my boat, and time how long it takes for the entire visible length to pass the centerline of the scope. Regardless of AoB I know the target speed.
Example:
Target is directly abeam (90 degrees) and the target is 30 meters long, if it takes 10 seconds for the bow to stern distance to pass the centerline of my scope, then the target is travelling at ~ 6 kts.
If the same target is at relative bearing 120, and the AoB of the target is 30 degrees, how long does it take the ship to cross the centerline of the scope? IT STILL TAKES 10 SECONDS!
It
appears to be moving slower, but the overall length of the ship still moves 30 meters in 10 seconds! As I'm measuring it crossing bow to stern across a fixed point, I can still get a good fix on its speed. Also, you can use any magnification you like to get a good view for the measurement as you only require the ship to pass a fixed mark - the center of the scope.
To get accurate AoB, I can then cheat:
If I know its range (let's say 10 hm), I know that a 30 m long ship should take 3 centiradians if it is at 90 degrees AoB. If I only see 1 centiradian (or 4 centiradians at 6x), its AoB is asin(1/3) = 20 degrees.
To parallel its course and remain in the same relative position:
180 - 120 = 60 off my stern
90 - 60 - 20 = 10 degree AoB less than I should see
I need to turn left 10 degrees and run at 6 kts to maintain relative position.
If I was already parallel to his course and he's 60 degrees off my stern I should have an AoB of 90 - 60 = 30 degrees. In the example it's not, so I must correct his relative bearing for the AoB seen.