OK, I kinda understand your situation, but you keep insisting that you need to do it this way for one reason or another.
Here's an idea... instead of coming to a group of clever and experienced problem-solvers with the solution and looking for how to implement it, come to us with only the problem.
This stuff about Surround-sound, can't control the level, need wireless control, and so on is silly. Yes, silly.
Look at it this way: The source is digital, on a computer or microcontroller. The transport medium is digital (optical fiber). The controlling module you want to add is digital. It is apparent that you don't know what is possible in the digital domain!
Even if you could not modify the programming on the source end, or add a driver for software volume control, you could still use any microcontroller with streaming ins and outs to be the control you need. Loosen up and quit letting your limited experience tell you (and us) how it is to be done.
Controlling the speaker output of a 100W amp with an attenuator is not practical.
Thank you for revealing as much as you have, but if someone had not stopped you, you would have been on your way to spending $500 on a digitally-controlled attenuator.
Now tell us why you think you need a rotary encoder. You just need control of the volume if the network fails, right?
Software is the answer.