Can rotary encoders be multiplexed?
If you're trying to use 64 encoders as "frob knobs", the more typical way of doing this is to use each encoder for multiple purposes, and have some way of controlling which purpose the knob is serving at any given moment.  Otherwise, I'd probably urge you to throw a microcontroller at each encoder, or at least have more than one microcontroller, each servicing as many individual encoders as it can without multiplexing -- you're already throwing more money at a problem than would typically be used, just keep going down the same path to make the device you want.  

Alternatively, you might consider absolute encoders, so you don't need to worry about missed pulses.

That's the best I can offer without knowing more about what you're trying to accomplish (hence, "XY problem", as my comment says).