If the encoder strip has 60 lines per cm then you can get a resolution of 240 counts per cm by counting all four edges of the quadrature cycle.

If you're OK with 60 it makes it a lot easier (compared to 4x decoding) since, again, all you need to do is poll channel B on the rising edge of channel A and you have your count direction. Using a coupe of external NAND gates (or perhaps the CLC module if your PIC has one) you can decode that into two discrete signals, up & down. Feed those into two counters on they'll count for you while you PAUSE.

If counting with software, polling the inputs, then using PAUSE, LCDOUT or any other command that takes longer to execute than the shortest time between two pulses WILL ruin the day - in which case resorting to interrupts or hardware counter is the only way. This is why I asked if the the counting should go on WHILE outputting to the DDS.

/Henrik.