If the cursor is just shaking, then this is likely a blown phototransistor (the slotted black optic). It could also possibly be caused by a bad solder joint.
The first thing I would try would be to reflow the solder joints with a low wattage soldering iron (25W or so). If that doesn't fix it, you could also try to replace the phototransistors. I'm not sure exactly which ones are used on the Arkanoid spinner, but any standard type should work fine assuming their pin locations will fit okay on your board. Here are some reference part numbers of phototransistors that will work with the Opti-PAC:
www.newark.com - 08f2623
www.digikey.com - qva11134-nd
www.mouser.com - 512-h22a1
The encoder board only sends pulses (square waves) which are interpreted by the Opti-PAC, so the type/brand of phototransistor doesn't affect the action of the spinner, in my experience.
If all else fails, then my optic board would work just fine on the Arkanoid spinner. You are right, the biggest problem here would be rigging it up to fit your spinner's optic bracket.