i steel get some minor jitter whenever one of the wipers leaves the resistive track.
Yes this is not surprising, there could be ways round this but first let me consider why you rejected the rotary pot idea.
The shaft encoder is not absolute, that is it will not remember where it was on power up so you have to have some sort of electronic indicator to show you where you are, you cannot use just the knob position alone. Given that the knob can be used in a multi turn mode to get the resolution you want. Alternative you can get an absolute encoder that has better resolution than you need with a "hall effect rotary encoder", google those words.
Back to your problem, you could use a boolean variable to determine what pot you look at and only look at that pot while it is in a specific range.
When you read outside that range, even though the readings are valid, you would switch to looking at the other pot. Again when a reading is outside that range you switch back to the first pot.
That way you are only looking at one pot at a time, the pot that is producing a valid reading. Enabling the pull up resistors will distort the linearity of the control and with this method you have no need to do this as when the input is floating you will not be looking at it.