As an update, I figured out the best short term solution is to run with the index pulse to Mach3. The PMDX 126 has a pulse stretching input pin specifically for this application, I used this pin for the 'I' input and it seems to work really well. I have not tried it on another normal pin. I am so far very impressed with the PMDX boards, they have great functionality, documentation and are well thought out for application.
I have promises from Warp9 that they will be working out programming to decode quadrature input from a spindle to bring into the ethernet smoothstepper, however it is not likely going to see light until after Mach4. Capability is there, looks like it just needs programming.