I'm not an expert, but I thought you were supposed to "tell" the MMJoy2 software which switch is the encoder. MMJoy2 will know then.
But in the button settings for Windows, you assign a button that Windows should recognize as an encoder. I think Windows doesn't need to know which button is the encoder, it just shows it as pressed or not in game settings or devices. Maybe that's the problem, but I personally don't have much experience with encoders, I only use one.
And I don't know how your connection behaves, I use SH. There are two directions from the encoder. If you have 4 encoders, there must be 8 outputs.