Since the repair performed earlier this week, see my separate post on the subject (TM-2570A Selector repair) the radio is usable but not perfect. It does not change on its own, it is just inconsistent when changing channels, sometimes it moves one channel per click and sometimes several.
Looking to try to improve this I continued to search for a service manual or parts lists and I was able to find a service manual for the 220MHz model. The control portion should be the same as the 2M version of this radio.
The manual has a little write up on how the encoder circuit works it is very straightforward.
A snippet of the schematic showing the encoder to CPU interface, very little to suspect outside of the encoder part given the behavior experienced.
After reviewing the newly found materials and the simplicity of the circuit I was even more convinced that the remaining problems lay with the encoder itself. Calling Kenwood for parts redirected me to the east and west coast vendors who handle parts for Kenwood. Checking both vendors websites the parts availability for this radio is slim to none and while one had the part in stock. The cost for the part and shipping makes no sense when new 2m mobiles are selling for less than $200.
And while the past does not reflect on the future I will when purchasing gear in the future check on the vendors parts sparing scheme. Is it an in house service, or something that they farm out.