precision rotary encoder midi controller

Arduino Uno only has 2 such pins,

Well while there are two pins that generate interrupts on different vectors any arduino pin can generate an interrupt in the pin change mode.

ive dabbled with several oem controllers and while in creative stages i never had the need for more than 7 bits

Which is lucky because that is all the MIDI control standard will give you unless you split it up into more than one message.

when controlling mastering parameters ive noticed how all of them have problems retaining precise increments

Odd that because there is no reason why that should be technically.