I recently interfaced an optical quadrature encoder for a rotary knob (with pushbutton) used to control a GUI. The knob had about 30 counts per rev. I used a SiLabs 'F124 and tied the A and B to two of the PCA0 Compare/Capture inputs, as well as the pushbutton to a third input. All inputs were set to edge-triggered capture, and in the ISR I determine the direction and pushbutton activity. Works great! Of course, I realize your pulse rate is much higher, but FWIW my counts never got off no matter how fast I twisted the knob back and forth. Gotta love those SiLabs/Cygnal parts - my favorite flavor of 8051!