Arduino as an encoder pulse divider?

Steve-
I think this may be of use to you: Creating a Quadrature Divider: What Won't Work

Some people on this forum can be quite snarky in their replies. This is in marked contrast to other forums I've frequented such as CNCzone.com or the EMC2 forum where I've always found people to be extremely helpful without copping an attitude.
Hope that link helps you.

-Greg