Next step: creating a mount to hold the IR LEDs and photodiodes. 

The middle plate attaches to the stepper motors and holds the photodiodes. Once assembled, the encoder disks are friction fitted to the shaft of the stepper motor. Followed by the IR LEDs held opposite the photodiodes on a raised "tab". I had hoped to make this more compact but the LEDs needed to clear the stepper motor housing so the disks ended up being ~2.5" diameter.

Here is the first working prototype. In lieu of small PCB boards to hold the photodiodes in place, a little CA glue did the trick with a very clumsy soldering of the leads to a flat, multicolored cable that was lying around.

A side view of the prototype. Even more clumsy underside with some electrical tape protecting the LEDs from shorting out against the metal case of the planetary gear casing on the stepper motor.