Alain
Thanks for the input on the Tx diode. I have checked the output of the opto encoder and the pin is toggling so I am assuming the diode is working.
I am using screw terminals to wire up the opto coupler and I have tested the connection to RB0 and it's good. I can also put a wire between the screw terminal and 5V and I can trigger the interrupt.

The power supply is a regulated DC 6V 300mA plug type. On the board have a 7805 regulator with 10uf + 100nF decoupling capacitors. I have 100nF at the opto encoder supply.

Thanks
Danny