Bizzare Quaderature Behavior

[phrontist]

We have spec-ed a 61K64 Grayhill quaderature encoder in part of our design this year. We have given them supply current from both a voltage regulator and from the +5/GND pins on the RC's digital in/out ports. Initially they functioned flawlessly, responding to rotation with the expected:

00
01
11
01
00

pattern, perfectly in phase and everything. Life was good. But after testing them individually with LEDs, I hooked them up to the RC and they weren't functioning at all. Assuming it was a programming error, I tried everything I could think of and exausted all reasonable possibilites. I went back to my LED test rig and found the encoders were behaving in a bizzare manner. Upon first being connected they would function as described above, but then one output (usually the B output) would start to blink slowly, even when the encoders weren't being rotated. It's blink rate would steadily increase until it was on fully!

Disconnecting and reconnecting the power did nothing. If the whole setup was allowed to sit for a while without being on, the encoders would once again function briefly before "decaying". Am I right in assuming these have been fried internally? I can't imagine what else would cause this behavior...