Encoder for stepping motor

Hi
I'm in the planning phase (got most of the parts) to upgrade my X3
mill to CNC. I'm basically following the instructions given in MEW
article. Before I start putting the parts together I would like to be
able to manually control it via an encoder and make a control box. A
colleague of mine came with a Sanyo Denki stepping motor Type 103-770-
6 8 wire. The motor is mounted on a bracket and equipped with a 55 mm
plastic hand wheel. He claims it has been used to manual control a CNC
machine. The motor wires are terminated 2 by 2 on a terminal plug (4
off) and together with a wire that goes to a 9 ways computer
connector. 3 of the computer connectors wires are terminated together
with 3 wire cable that has been cut off.
Could this work as an encoder? Moreover, how should it be terminated?
Gaute