Hi johnc,
I used an encoder from another source, but it's similar to the one from Smashtv with 12 detents per revolution instead of 24. That wouldn't matter in this application. One would be a little more sensitive than the other. The mods that I've seen were to remove the detent action for those who prefer that feel. For menu selections like with the midio128 the detents are helpful. For use as a volume control, or something similar, the detents might not be helpful.
They work right out of the box -- if the direction (CW/CCW) is wrong just reverse the leads.
I was going to reply about your organ relay thoughts, but I use Haupterk almost exclusively and it does all the relay functions in software so that one just needs to provide something like DOUTs with the right drivers and power supply to handle the SAMs.
johnk