While it doesn't explicitly state it in the article, it appears that the encoders in question have single ended outputs. It appears that the extenders convert the signals to differential mode, which is much more noise tolerant. Shielding is a good idea, but with single ended signals I doubt it would have been enough if there is serious high frequency switching noise all around.
Having built and serviced CNC plasma cutting machines, proper shielding of cables does wonders. The comercial products we used all had shielding built into the harness to keep the noise out. And the shields were always grounded at 1 end only., and in some cases where the design was older and more sensitive they actually had 2 shields, insulated from each other and each one grounded at opposite ends of the cable.
Also - effort should be made to seperate the motor and encoder cables. Often just having them shielded and a few inches apart is sufficient.
You mention using shielded cables. Did you ground only one end of the cable shield ? I have seen installations with both ends of the cable shield connected to ground, which makes ground loops a concern.
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Noting that we now live in an era of “confusion and ill-conceived stuff,” Ammunition design studio founder Robert Brunner, speaking at Gigaom Roadmap, said that by adding connectivity to everything and its mother, we aren't necessarily doing ourselves any favors, with many ‘things’ just fine in their unconnected state.
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