Using this interface circuit you can use an old HDD drive as a rotary encoder and react to increment/decrement events very easily.
This is based on and inspired by Franck Fleureys project. I changed quite a lot, expecially in the software, though. Have a look at Franck's work here:
http://www.fleurey.com/franck/pmwiki.php?n=Main.HDDEncoder
An EAGLE file with the schematic can be found in the folder HddEncoder.eagle. You should be able to understand it after having a look at the web site I linked to above.
Want to see this in action? Have a look at my (German) videos on Youtube: