Really all I needed to do was change the "debounce" circuit.
It needs to look like this (Figure 2) on each side of the encoder
Debouncing Contacts Part 2
Then you just need to adjust the resistor/capacitor combination to vary the length of bounce suppression.
The CMOS Cookbook has a table of combo's as a guide to the length of Charge/Discharge.
http://books.google.com/books?id=PhW9eMDmFGYC&pg=PA293&lpg=PA293&dq=rc+circuit+resistor+capacitor+value+cmos+cookbook&source=bl&ots=5BPFait6G2&sig=9CK-5h-7skYQyS0b_g8ZCl9RaEM&hl=en&sa=X&ei=fBuXU8aMCNHQsQSrooEo&ved=0CCAQ6AEwAA#v=onepage&q=rc%20circuit%20resistor%20capacitor%20value%20cmos%20cookbook&f=false
Hope that helps until I can sit down with the editor and redo the schematic.
~Blaine