Hello ICE,

From the PDF file page 3:
http://www.parallax.com/dl/docs/cols...l1/col/nv8.pdf

In the case of the encoder sequence, it turns out that for
any given sequence, XORing the righthand bit of the old value
with the lefthand bit of the new value tells you the direction
of rotation.
For example, take the clockwise sequence 01 00: 1 XOR 0 = 1.
Now the counter-clockwise sequence 01 11: 1 XOR 1 = 0.
This relationship holds for any pair of numbers in either direction.

* * *
The code for the above is:

direction_bit = old.bit0 ^ new.bit1 ' 1 if CW, 0 if CCW

* * *
In your code:

Pause 10 '= 10 milliseconds

* * *
This will help you to debug your code.

Remove the line
LCDOut $fe,1,"no movement"

Replace the lines
LCDOut $fe,1,"one dir" with LCDOut $fe,1,"Last direction was CCW"
LCDOut $fe,1,"2nd dir" with LCDOut $fe,1,"Last direction was CW"


Luciano