Hi,
Again, you don't have to use the index channel, it'll work fine without it. If you set up the QEI module to reset on index (as in my example) and the encoder doesn't have an index channel the counter will simply roll over from $FFFF to $0000 or from $0000 to $FFFF depending on direction. Carefully read the section of the datasheet, play with it a bit and read the datasheet again, you'll figure it out ;-)

/Henrik.