Bob I have done this on a ML S7 with a 100 slot encoder. Do you intend to put homing switches on the lathe. As that bob will only have 5 inputs. you can get away with A and Index pulse (2 inputs) better with A + B and index 3 inputs. personally I would go with a mesa card something like 7i76 or 7i76e for ethernet. if using Lcnc.

I am happy if you want to come over to see mine Stockport.