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As you might have read on the PCI7342 data sheet you can connect two quadrature encoders to the board - just as many axes you can control.
Probably there is some kind of misunderstanding: QUADRATURE encoder means that it is an encoder with a two-phase output. Both outputs have a phase shift of 90 deg. This makes it possible to detect the direction of rotation. Also, in many cases (as on the 7342 boards) by detecting rather the edges of the output signal than their levels, you can get 4 pulses for each encoder step, hence QUADRATURE.
If you are not familiar with quadrature encoders or rotation encoders in general the tutorials on the NI website might be helpful.
Thank you for your clarification. I was a bit confused by your question. Never mind!
Anyhow, maybe you can use the second pair of encoder input lines. I think it is not necessarily to drive an axis with step pulses to be able to read the position counter. I think as soon as you define a second axis with encoder feedback you should be able to read back the position counter. At least the encoder counts are displayed in the MAX software even if no step pulses are issued.