I have made an encoder wheel from an old CD. I printed the code wheel on an over head transparency then laminated it to protect it. I cut the printout in the shape of a wheel then glued it to the CD with spray on contact adhesive. I found an old CD drive I have and removed the rotor part where the CD sits on to spin and what do you know the shaft from the gearbox fitted it like a dream. On the other end of the gearbox I put a remote control car wheel which press fitted nicely. I have also raided a few old mice that I have for the sensors so we will see how they go working with the encoder wheel. oh yea the encoder wheel has 1,000 ticks per rev and the gearbox ratio is around 1:4 (hope I got that around the right way).
I was hoping not to make a wheel with a gearbox but the resolution would have suffered but still it is far cheaper than buying a Encoder so far.