No, I think it was both. Let me put it in time order.
1) New scope. I noticed that sometimes the trigger level was "flaky"
2) Soon I can only adjust the level up noisily. So you can reset to the baseline (push the button) and move up, so it was usable. At this point, I think the diode had completely failed.
3) Assuming it was the encoder I am twisting the encoder, trying to pull it out while turning, push it in, etc. Contact cleaner, compressed air, etc. Nothing helps.
4) Over a few months the problem becomes worse. Now twisting the encoder knob just causes the trigger level line to jump up and down maybe one step in either direction. The only way to get useful position is to use the 50% key. At this point, I think the encoder has failed.
5) I take the thing apart and clean and respring the encoder several times. No change.
6) I replace the encoder. Now I am back to the behavior in #2, so the new encoder did change the behavior. It just still didn't work.
7) Replacing the diode under the encoder restores normal function.
So I think the encoder was OK to start with, but eventually failed prior to me opening the thing up.