what i actually want to know is , is there a microcontroller with 32 bit up/down counter ?
Yes there is: P89C51Rx2 and P89C66x both have a PCA than can be driven by T2 thus making a 32 bit counter with T2 as LSW and the PCA as MSW.

This, however will not save you from the considerations mentioned in my first post. You can believe, I have tried and tried to do the incremental encoder directly to the uC. In that particular application one wrong in the count equal disaster and with the very latest, smartest and best code and processor there still was an occasional miss due to high frequency rattle.

Erik