Because both anode and cathod (with series resistor) are wired out on the inputs of the AXBB therefor you can connect NPN and also PNP sensors.
You can see the connection diagram for both on the pages 23. and 24. of the AXBB-E manual:
http://cncdrive.com/downloads/AXBB_E_manual.pdfYes, the shorter sensing distance sensors are usually more precise, but with short distance sensors you will have to be careful how you placing the sensor, I mean you should place it to let the axis overrun, because it is not sure that the axis can slow down and stop on a 1mm distance (depends on the velocity and acceleration/decceleration values). So you should not place the sensor when it can collapse to the axis.
We usually use 2mm or 4mm distance NPN sensors on our machines and we place the sensors in a way that the axis can travel next to it so it never collapses to the sensor, even if the sensor fails to trigger the axis will not collapse to the sensor.