Phil,
Well, the scope revealed the encoder was bad. I replaced it and corrected the wiring to get the count direction right. Now I have an issue with another area.
The encoder signal is also used to track Feet Per Minute. The function works, but intermittently, almost like a cycle, the display resets to zero and starts back up. I saw the 1B light get bright, for a second, every time this happened. I also see this in channel1_pos, it suddenly goes negative, then back to normal.
I don't know if the module is bad, or the encoder is. I'm going to try connecting it to channel2 to see if the problem follows.