So the 2" flange with the three holes is fixed and the 1-3/8" part spins, right?
Oddly enough, not exactly. The entire piece shown in overhead view (first pic) spins the way I have it setup. The flange and the 1-3/8" part is a single unit. When you flip the spindle over (second pic), you see the part that the hard drive discs used to be attached to. Technically speaking, that's the part that spins. But by securing that side down, the opposite is true.
Short version - I turned the static piece that normally is screwed into the hard drive body into the spinning part by securing the original spinning piece. Gives me a nice big spinning pseudo-knob.
What's intriguing, and not true about all hard drive spindles I've extracted, is that the hole you see in the center of the spindle in the 2nd picture is basically the axle for the spindle. On some hard drives, that axle is a solid bar, others it has a hole with threads for one of the cover screws to secure into. Because the axle doubles as a securing post for a cover screw, it's a solid piece that's attached to the base that I'm using as my knob side. This means that, as a single unit, the base and that axle spin together. That's what allows me to flip the spindle over and use it essentially upside down. Because that axle/pin is secured to the part I'm twisting, all I have to do is attach the encoder wheel and boom, done.
That's a wordy explanation, I hope it makes sense. If not, I can maybe post a quick video demonstrating the mechanics.
How tall is the 1-3/8" part?
Depends on the spindle, they can vary, but about 1/4" seems close to consistent. Perfect scenario, I use the holes you see on the flange to attach a knob, either by screwing down through the knob from the top and using a small bolt/nut, or by screwing up into the knob from underneath and thus hiding the attachment method.