Hi Sean,
KFLOP encoder inputs require a quadrature signal so it can track direction and therefore position. If you could mount another opto sensor shifted 1/4 of the hole pitch then it could be used.
What is the max RPM you will be using? If not too fast you may be able to count hole transitions in software.
Otherwise an RC (resistor - capacitor) circuit can be used to generate a phase shifted version of the pulses to create quadrature. See this Thread.