#define NUM_SW_GPIOS 50 //arbitrary number
#define NUM_GPIOS (NUM_HW_GPIOS + NUM_SW_GPIOS)
typedef int (*swGpioReadFunc_t)(int pin);
swGpioReadFunc_t readFunc[NUM_GPIOS];

int _readHwGpio(int pin) {
  //whatever hardware-specific code here
}
int _readDummyGpio(int pin) {
  return 0;
}

void _initGpios() { //would be called at some point during boot
  for(int i=0; i<NUM_GPIOS; i++) {
    if(i < NUM_HW_GPIOS) readFunc[i] = _readHwGpio;
    else readFunc[i] = _readDummyGpio;
  }
}

int gpioRead(int pin) {
  return readFunc[pin](pin);
}

swGpioReadFunc_t gpioSetReadFunc(int pin, swGpioReadFunc_t func) {
  swGpioReadFunc_t old = readFunc[pin];
  readFunc[pin] = func;
  return old;
}

Encoder myEncoder(PIN_ENCODER1, PIN_ENCODER2);

#define PIN_MCP_BASE 40 //pin 0 of MCP23017 is virtual GPIO40
MCP23017 mcp(PIN_MCP_BASE, whatever);

#define PIN_ENCODER1 (PIN_MCP_BASE+0)
#define PIN_ENCODER2 (PIN_MCP_BASE+1)
Encoder myEncoder(PIN_ENCODER1, PIN_ENCODER2);

int _gpioRead_mcp(int pin) {
  //assume this reads one bit; inefficient for simplicity's sake for demo
  return mcp.read(pin - PIN_MCP_BASE);
}

void setup() {
  gpioSetReadFunc(PIN_MCP_BASE, _gpioRead_mcp);
  gpioSetReadFunc(PIN_MCP_BASE+1, _gpioRead_mcp);
  //...repeat for however many pins you want to use
}