Justin,
Normally, the mfgr. would include a recommended "Line Receiver" interface circuit for the encoder. I've found that some line-driver encoders actually can be successfully connected directly to the 6602 for quick-and-dirty testing, though you wouldn't want to wire that up arbirtrarily or rely on it for the long term. In any event, it sounds like you'll need to add a line receiver interface.
-Kevin P.
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