Here are some threads talking about how to work with the encoder.
http://www.picbasic.co.uk/forum/show...rotary+encoder
http://www.picbasic.co.uk/forum/showthread.php?t=1552
http://www.picbasic.co.uk/forum/showthread.php?t=9700

As far as stopping goes...
Does the motor have a built in brake for holding? It can be stopped by shorting the leads but how fast it stops that way depens on the speed it is running when the leads are shorted.