@Adam: No we are also doing ground based astronomial telescopes.
That's huge ... and you're only going to use one NeoPixel? Shame on you -- you can't have too many flashing LEDs -- people won't take you seriously if you only have one LED on a monster telescope (plus they won;t think they are getting their money's worth LOL)
@Crusty: Now there is something I agree with you on and that is the Arduino Workshop.
It really is a great book -- in addition to fundamental concepts, there's all sorts of useful stuff in there, like connecting two Arduinos via I2C and having one be the master and the other be the slave (usiually the Arduino wants to be the master).
@Crusty @Steve: As it is an Atmel chip are you using Pin Change interrupts?
Thinking about it, there are de-bounce functions in the Arduino library. Steve, do you have the Arduino Cookbook or the Arduino Workshop? (Both are recommended, but if you only get one, make it the Workshop). They cover this sort of thing.
It sounds like you are going through quite a steep learning curve.
But the project and what you are producing look worth the effort.
Rotary encoders can be a pig to debounce, I usually do this in software, its almost a trade against filtering the input and missing clicks on the swich position, which can be annoying, especially with counting up and down.
I have not tried it yet but, I think a timer reset after each interrupt from each bounce and read the state of input pins when the timer is able to time out. This should take out the problem of switches getting worse on bounce as they get older.
As it is an Atmel chip are you using Pin Change interrupts?
Max can give you my contact info in England, if you want to discuss Atmel chips and software offline.