EDIT: http://simhq.com/forum/ubbthreads.php/topics/4379922/re-mmjoy-mmjoy2-build-your-own-usb-controller#Post4379922by Sokol1
Lucky-hendrix, I guess you should code it yourself...
It's possible, and actually it's how axis are read within ENTROL sims (http://www.entrol.es), the encoder is part of the servomotor.
I don't know about programming but, I can guess you need to modify an Arduino joystick to axis out put instead of reading a ADC, to send a counter of the steps of the encoder. Easy to say, but I don't know how easy would be to code it.