You need a board for the Index homing. I use the one from Ed at
www.cncbuildingblocks.com What happens is you press to home from Mach, the axis start moving and when the switch is hit the breakout looks for the Index pulse then tells Mach that the switch has been hit. Mach then reverses the axis and when the terminal count (set on breakout) is reached Mach is then told the switch has closed and that is the homing routine complete. The terminal count can be set quite high to accomodate for high count encoders which is handy on my system as I have 2000 line encoders (8000 as far as Mach is concerned).
I use this on my lathe and it works very well.
Hood