Preclinical PET systems image animal models of chronic human disease that are used to evaluate new therapeutic strategies for the treatment of cancer and other diseases. Once these animals are out of a controlled environment for PET imaging, they typically can not be taken back as they may have been exposed to outside disease. A highly compact PET system is thus required to be developed that can operate within a bio-safety cabinet inside a barrier facility. We investigated using 100-mm-long LYSO scintillator crystals oriented in the axial direction and read out at both ends by position sensitive photomultiplier tubes (PSPMTs) to construct a compact PET. The optimization of light collection for axial encoding of events was carried out using different reflector materials and surface treatments of 3 × 2 × 100 mm3 and 2 × 2 × 100 mm3 polished crystals. The detector response was examined by irradiating the crystals at discrete positions using an electronically collimated 511 keV photon beam. The ratio of two PSPMT signals was used to find the axial-resolution while their sum was used to determine the energy resolution. We then explored the effects of creating systematic band patterns of surface roughing on 1 to 4 long surfaces of the crystals to modulate light-transport with the goal of further improving axial-resolution. These experimental results were used to benchmark DETECT2000 Monte Carlo simulations for our detector geometry. The axial-positioning calibration was carried out by evaluating a uniform flood-irradiation method and comparing with the collimated-irradiation method using 2 × 2 × 100 mm3 crystal detectors. The best axial-positioning resolution of 3.4 mm was achieved in this study for 2 × 2 × 100 mm3 Teflon-wrapped crystals with banding-patterns on only two opposite surfaces, fulfilling the design criteria of our proposed PET. The benchmarked DETECT2000 models can now be used to predict the performance of a complete detector module design. The calibration methods agreed if the trigger threshold energies were adjusted to give similar single event rates in both PSPMTs for uniform flood-irradiation. The implementation of flood-irradiation method in our complete PET scanner will provide a simple axial-positioning calibration.