Brian, doesn't this quote from the Mach2 customizing manual contradict you here.
"It is also possible to connect an encoder (typically low resolution like those used as "digital potentiometers" in hi-fi and video equipment) and to generate a given scancode for each "click" in the clockwise direction and another scancode for each counterclockwise click."
Doesn't this say that you can use an encoder for feedrate override?