Robodrill Problem

I have a '93 Fanuc Robodrill (new to me). It's a T10a with a 16 series control.
Just got it up and running and I have a problem.
The z axis is running up too high (about 1/8-1/4") when changing tools.
The machine does change tools ok.
The spindle gear is engaging the turret gear in the wrong location and making a grinding noise when turning the turret. I know its engaging the turret gear too high because it stopped (alarm) in that location, and I can see its not meshing in the correct location.
I don't know if this is part of the problem but: During shipping the z axis encoder was broken and I replaced it with a new (used) encoder.
Could it be that the z axis has lost the home position?
If so, can I make a parameter change to fix the problem?
Also, I'm new to running cnc. If someone could walk me through the process, I would greatly appreciate the help. Thanks.