[TimCraig]

Since you said last year's encoders, I assume you're using the PIC 8722 based 2006 controller. There are a number of silicon flaws in that chip that some of us never got our interrupt and timer routines to work properly with in spite of the published "fixes". I was using Timers 1 and 3 to do pulse with timing similar to what you're doing and at least one of the timers never worked properly. The same code executes perfectly on a PIC 8520 based 2005 controller however. At least one other team I know of had similar results. So my advice would be to try it on an 8520 before you blame your code.