With the encoder disconnected from the machine, manually turn the encoder shaft very slowly, and connect a voltmeter 0V & CP1, and connect another voltmeter 0V & CP2. Do you see CP1 go high, then CP2 go high, then CP1 go low, then CP2 go low, etc.? I see the wiring and encoder was checked, but this will also check the encoder outputs and the CTT NPN/PNP setup, (CP1/CP2 sequence may be reversed depending on direction and NPN/PNP setup). Does the CTT display a speed at slower speeds? Could the signal exceed the CPS or pulse width specs? Also, check the CTT config settings for the Tach function. Usually for me, it's the config settings, and/or the NPN/PNP setup/wiring, and/or getting the right encoder output type.