My previous code (attempted to) use the phase output of your previous encoder as the clock to a 16-bit counter with the IDX (index) input as the "TDC" indicator. Letting the hardware do the counting and setting output compares to trigger things like coil dwell or injector firing makes more sense to me.
It's not clear to me if the electrical speed spec on the absolute encoder relates to a single pin or the entire output. You may be able to try the rising edge of the brown wire to the external clock source of the timer counter as Blackfin suggests. You may get lucky and see responses up to the 3K.
Did you try his approach with the incremental encoder?
Finding TDC is a separate issue, but you may be able to do that with slow cranking before the engine fires.
i have no doubt they are fantastic controls
what is "AVR's"?
i just dont know the limits of arduinos or encoders really.
kinda silly to mention the 5000 rpm limit of the encoder if it can not function above less than half of that.
learning pretty quick though
i have a nice little 7500 rpm servo motor on the bench. i wonder what kind of encoder it has in it? 8)
i need to get some free time to finish up the install on the floor motor so i can try out his code
finding TDC is easy with a piston stop
settin the z should be easy too with a....
when Z== high, turn on ledpin
type code....
i run these bad boys on some of my machines
Real-time motion control that relieves the host computer of that duty
High Performance 1.2 GFLOP DSP
64-bit Double Precision Hardware Math
All 8 axes are sampled every 90 microseconds
USB 2.0 Full Speed Host interface (or run stand alone)
16 MBytes RAM
how much more badd ass is this than an arduino??? :o
heading to the dunes monday so it will be late next week until i can mess around with this more
quick video of the goal
cattledog
your last code looks to run perfect 
thanks for the help you guys!