Wow, that''s really elegant. Not for me - I'm a simple-minded person with a taste for simple things - but since I also suffer from a need to think out of the box I'd like to contribute -

Your concept is similar to the canister rudder used on certain sailboats - see exploded view. Of course you could make it simpler because you do not have to deal with sailing forces.

For a sailboat where the rudder is usually off-center the hull bottom is ideally flat so the drum and hull lower edges line up as the rudder turns, but that isn't as important for a kayak since the rudder will be centered most of the time.

The canister design will, I think, be easier to design and build. I'm thinking plastic or aluminum tubing, it's not hard to find mating inner and outer tube sizes.

It starts to look really straight-forward if you can live with with an external lift/deploy mechanism and then it would be simpler to maintain as the entire drum/rudder assembly could be lifted out from the deck.

More info here - http://www.epoxyworks.com/18/rudder.html