It could be the encoder. Later versions of the original TI encoder could develop issues. @NeilS might know more here. What’s the serial number of the NAC112?
Yes, the early potentiometers can be an issue with these. They work via voltage instead of signal, the voltage drives the resistor ladders, so when the pot becomes noisy, it translates into a fluctuation in the output level.
There is now an updated pot & PCB that have proven to be more reliable, these are updated on all 112s & Nait5s as required during a Naim repair/service.
I believe the cost of a Naim service is £300. If it were me I’d try to find a 122x, which sounds considerably better. Alternatively, speak to Class A in Sheffield, who are cheaper than sending it to Naim, fully approved and just as good.
Stu, If the ability to set the volume control to match the output of each of your sources is not important to you, I would consider replacement with the stonkingly good NAC 152XS. This preamp is essentially Naim’s most recent incarnation of the NAC112, it will take both feeds from a FC2, FC2x or FCXS.
Such is the quality of the NAC152XS that when it was introduced, Naim recommended the NAP200 (from the range above) as a possible alternative to the lower ranked XS power amp. To the best of my knowledge, Naim had never done this before.