Heya guys... I'm new to the board (been lurking for about a week and a bit... but getting increasingly tempted to post).
It's seems bizarre to me why you'd use such a system of relays etc. Have you considered using something like the TI PGA2311/0 digitally controlled volume controls?
Let me get this out the way as well (just in case i'm recognised from other online music groups I contribute to) -- I work for TI. Having said that, I have a strong interest in DIY Audio, and will happily look at competitors parts if they suit the application better. (in other words, I do my best to be unbiased). :oops:
Back to my point, the PGA2311/0 come in Thru hole packaging, so there isn't much need to go surface mount if you don't like the idea of doing that. You can also easily control it from a micro or your pc. It's a very simple serial port that is programmed with only a few control pins.
For the processor, you may not even need to use a a micro with an operating system (such as MIOS). If all you want to do is take control signals from a rotary encoder, then why not use something like an MSP430 (get cheap kits from TI or Olimex), and have a very simple program that polls (checks) the input pins from the encoder every 1mS, then sends a serial code to the volume control, based on the change in setting.
Very very very very simple stuff (i'm in sales & apps, and even I can do it!). If your interested, please feel free to drop me an email - Rochey69 at the warm mail. com
-- or even better start a new thread where we can discuss it more!