Maybe the encoder is not soldered in properly? Also make sure that the center pin of the three is at 0V (ground). You can check the turning function for alternate shorts to the center pin (2-bit Gray code). You should measure either +5V (10k pull up through the resistor network) or 0V if that contact is closed.
The switch side needs its diode connected and it should show up in the debug log.
Or you don’t register anything with “set debug on”?