[Joe Ross]

I googled for usb encoder, and besides video encoders, I found two different devices. Once was from phidgets, the other from us digital. Neither of their manual mentioned HID or joystick, so I think it's very unlikely that they work out of the box with the driver station software. If the device you are looking at has programmable firmware, you could probably make it look like a joystick by following the HID protocol and make it work.

Now, for another solution to the problem. Did you realize that the cypress I/O module has 2 quadrature inputs if you put it in extended I/O mode?