If you have a segment $AB$, place the unit length segment on the line where $AB$ lies, starting with $A$ and in the direction opposite to $B$; let $C$ be the other point of the segment. Now draw a semicircle with diameter $BC$ and the perpendicular to $A$; this line crosses the semicircle in a point $D$. Now $AD$ is the square root of $AB$.
$\triangle BCD$ is a right triangle, like $\triangle ACD$ and $\triangle ABD$; all of these are similar, so you find out that $AC/AD = AD/AB$. But $AC=1$, so $AD = \sqrt{AB}$.
See the drawing below:
Have you considered finding the intersections using an implicit form for the circles, $$\frac{x^2}{r^2} + \frac{y^2}{r^2} + ax + by + c = 0?$$ This representation doesn't have any coefficients that diverge as the circle approaches a straight line. To find intersections, you'll have to solve a quadratic equation whose leading coefficient could be zero or arbitrarily close to it, but the alternative form of the quadratic formula should be able to deal with that robustly.
You'll then have to do some jiggery-pokery to figure out whether the intersection points lie within the arcs. If the arc's bending angle is smaller than $\pi$, a projection onto the line joining the endpoints will suffice.
(Disclaimer: While all of this feels like it should work, I haven't analyzed it in any detail. Also, there could still be a problem when the circle is close to a line and you want the longer arc. But I can't imagine that's a case that would turn up in any practical application.)
Update: For a concrete example, here is the equation for a circular arc passing through the three points $(0,0)$, $(0.5, h)$, and $(1,0)$: $$\kappa^2 x^2 + \kappa^2 y^2 - \kappa^2 x - 2\eta y = 0,$$ where $$\begin{align}\kappa &= \frac{8h}{4h^2 + 1}, \\ \eta &= \frac{8h(4h^2-1)}{(4h^2+1)^2}.\end{align}$$ As you can see, the coefficients remain bounded as $h \to 0$.
Update 2: Wait, that equation becomes trivial if $h = 0$, which is bad. We really want something like $x^2/r + y^2/r + ax + by + c,$ i.e. multiply the previous expression through by $r$. Then for the same example, our equation becomes $$\kappa x^2 + \kappa y^2 - \kappa x - 2\eta' y = 0,$$ where $\eta' = (4h^2-1)/(4h^2+1)$. Here are some explicit values.
$h = 1/2$: $$2 x^2 + 2 y^2 - 2 x = 0,$$ $h = 0.01$: $$0.07997 x^2 + 0.07997 y^2 - 0.07997 x + 1.998 y = 0,$$ $h = 0$: $$2 y = 0.$$
By the way, in this format, the linear terms will always be simply $-2(x_0/r)x$ and $-2(y_0/r)y$, where the center of the circle is at $(x_0,y_0)$. As the center goes to infinity but the endpoints remain fixed, these coefficients remain bounded and nonzero (i.e. not both zero).
Best Answer
Use a thick disk and a thread. You can roll/unroll and straighten the thread to convert from arc to line segment.
Alternatively, use an Archimedes' spiral. The polar angle and the modulus perform the same transformation.