Is there a way to use 4-bit rotary encoders? Or to change their functionality by not using some pins, so that they act as 2-bit encoders?
Any other encoder insight would be appreciated.
The output protocol of such encoders is mostly a gray code which ensures that the rotation direction can be determined with an higher count of pulses per revolution. So the only way is to decode this code with the PIC. A nice Plug-In for the MIDIbox NG 
Best Regards, Thorsten.