Here is a great Application Note that is very detailed about using encoders with E-Series DAQ cards.
http://zone.ni.com/devzone/conceptd.nsf/webmain/6F25CBA2CD73417786256869005E5FC3?opendocument
As you will see in the App Note, you will want to connect one encoder line to the source and the other to the UP/DOWN pin. The DIO 6/7 pins are the UP/DOWN pins for counters 0/1 respectively. This is all covered in the App Note as well.
Hope this helps.
Kevin R
Applications Engineer
National Instruments