Started the lathe spindle up yesterday, it went straight to maximum speed, where it remained until the following error limit was tripped and everything shut down. Quick check of the axis channel revealed no encoder pulse counting going on.

I've just spent a bit time with the oscilloscope, and the A channel input on the Line Driver chip is not getting switched, so it looks like an issue with the optical reader/circuit.
The strange thing is, I couldn't find any pin from where the reader head ribbon cable connects to the PCB that was switching, so I'm not even sure how the B pulse works. The only power I found was the supply to the LED.
I'm not wanting to dismantle it yet to see what's on the underside of the PCB, as I've just emailed the original supplier to see if they'll be able to repair/overhaul it, and I really don't want to send them something that's been hacked to bits already.

I suspect something electrical has died, rather than mechanical, as it was running fine last week, so it's more likely something gone pop when powering up.