Yes, a 1000 is a big difference but I still believe I do.
I am needing to read from 8 encoders for one robot and so I think I would run into problems if I use interrupts directly on the Arduino, for example if two or more encoders pulsed at nearly the same time, the first one would trigger the interrupt causing the next one to be missed. Does that sound correct?
Using the external IC, it can keep count while the Arduino polls them for the position data whenever I need it for my navigation.