I think my first test should be to check all the output pins are displaying changing bits or not, so I should will try and read the least significant byte and see if it changes on rotating the encoder.
I think the method of reading entire 8-bit ports has confused me a little as I'm quite new at embedded programming. I don't see why I can't just read all 8 bits one by one, more code to write but speed is not an issue as the outputs are supposed to latch for reading.
I will update as soon as I have any results (might be the weekend).