Right now I am testing prototype using Arduino LCD shield with rotary encoder, and the sample code that goes with that. After I found a problem with the encoder, I did some more internet research and found TOO MANY other options to handle rotary encoder interfaces, it got overwhelming. Yes - The sample code uses interrupts.
The end product I plan to use is a 16x2 LCD display, with a SERIAL spi module (to free up all the all the pins needed to interface that with), and seperate pushbuttons & rotary encoder mounted into a control panel.
A problem in the past I have found, I have to test with the exact rotary encoder I plan to use to produce the product - since if I buy one that works, then 100 more from different manufacturer at a cheaper cost - SURPRISE!! The signalling changes! I have to totally re/do the project.
As it turns out, I believe the two digital pins 2 & 3 (on the arduino lcd shield) needed a re-solder, after I did that - the project appears stable (for now, again). As of now I'm not having trouble with the encoder interface (yet). I fear more "Ghost" will appear once the interface is mounted in control panel with vibration from truck driving, and or whatever electric interface from engine noise.