Lots of progress has been made but have fallen behind in posting...

With the encoder more or less figured out and the basic circuitry understood, I set out to build a fully working breadboard prototype. 

Once again, not the prettiest of prototypes but workable to develop the software.

The green boxes each represent the 3-bit encoders needed for the thermostat knob and the mode selection knob. Two DRV8255 stepper drivers are in blue. Since the pycom has an onboard voltage regulator, it likes to run above the 3.3V recommended for its own inputs. The dc-to-dc step downs that are on the prototyping board are lousy at maintaining a constant voltage (I tried several manufacturers too!) if there is any sort of load; if set to 3.3V, there is enough of a voltage drop (~50-150 mV) under load that the pycom won't run. To avoid an issues of having the IO pins being driven above their safe limit, pycom's input voltage is 4.5V and then the LM393s are powered off of the pycom's 3.3V regulated output. Vmot for the stepper motor drivers are regulated separately at 12.5V.