Steve:
If you do wire it up make sure you try it in an environment that would simulate a real field situation. In particular be certain about making sure you have a lot of noise on the power supply line and make sure that there is a bit of mechanical vibration introduced into the encoder so that the shaft of the encoder experiences ISV with respect to body of the encoder. (ISV == Instantaneous Speed Variation). Under these conditions you will surely see the issue.

I have sometimes tested this kind of environment by using a function generator to be the power supply to simulate noise. For example set the output at 1 KHz with a sine wave peak to peak amplitude of 0.4 volts and a DC offset of +5volts.

For encoders that look like they may have been built for a sturdy application, (I.E. heavy cast case and 0.5 inch diameter shaft, which surely the pinkish ebay picture shows) you may have to actually connect the shaft up to a real "load". On the bench you could possibly do this with an arm of some type and introduce vibration with a small DC motor mounted on the arm that had an off center weight mounted on its shaft. Lower cost type encoders that are contained in flimsey cases may be testable by simply vibrating the whole encoder.

Have fun
Michael Karas