I stil cannot see how this piece of code can be true:

Code:
RotEncDir = New_Bits.1 ^ Old_Bits.0
    IF RotEncDir = 1 Then
If you follow what Henrik has posted on that pulse train diagram at #21, you will see that after the above XOR, the IF RotEncDir = 1 statement will always fail and the ELSE will be executed.

Ioannis