I was just going through the archives and found this post, not sure if you still need it.

A year or so ago I went through a project with a quad encoder, I ended up using the portB interrupt on change pins and decoding the quad signal in the interrupt.

At the time I found some special purpose chips that did the job too, but IIRC they were like $14 USD each so I just wrote it into the PIC.

Also, recently, I was at a Microchip seminar, apparently thier new motor control parts have built in quad decoders, though I havent had a chance to try them myself yet.

Hope that helps,
Denny