I've had odd results with windows either not seeing new hardware or loading drivers correctly first time the PC boots
Do you have a multimeter to check the 5V supply to the rotory encoder ?
once you confirm the 5V supply is correct
measure the voltage between the common 0V and A output
depending on its position when stopped you will either have 0V or +5V
while your rotating the knob the output will switch between 0 & 5V (50% of the time at 0V and 50% at 5V)
( see the Quadrature outputs here :-
https://en.wikipedia.org/wiki/Incremental_encoder )
your meter will read the average 2.5V
you should see the same measuring between 0V and the B output
John