You must have a technician in your shop who can trace (log) the encoder's signal? There are only 3 signal wires on a scale (??), get him/her to do some work a bit. Establishing whether the encoder, joints or plc is at fault takes roughly an hour or two. Ideally you'd also need to trace the time the brake takes to engage and disengage (in ms) and sync the motion. I'm suspecting rotation before the brake's full disengagement - that could be a reason your encoder gets fooled. You've tried placing a short period G4 before rotations and see if that helps?

What sort of control/plc Hurco runs on this VM10? looks like a custom siemens vnck package