MOVED TO TRUTH TABEL _Rotary switch encoder problem

[mg73]

I have an MPC 3000 that had a bad rotary encoder(48 detents) or I thought was the problem
ordered a new one same problem.Seller claims it works perfect.

Tried a 24 detents encoder and it worked fine.

Could the circuit be defect and can't handle higher resolution encoder
and only encoder with less detents
and if where should I start to  look.

Now the encoder goes direct into NEC IC
with 5v on the left and right legs

attaching the schematic.