I downloaded a simple example from https://github.com/vickash/RotaryEncoderPCNT/blob/main/

It (the simple demo) builds fine in Arduino 2.3.6, but fails in VS/VMicro. I have attached the log. The error message is beyond my pay grade; can anyone help with interpretation?

Here is the .ino. It also failed with the same report when I tried the basic 4 line .ino in the readme on that github page.

Thanks for working through this with me.

The root cause was the CPP and H from the library were added in the root of the project, which also had the same name for itself and the INO.

This means when it builds there is a conflict between the RotaryEncoderPCNT.ino (which is converted to RotaryEncoderPCNT.cpp in the build process), and the original library "RotaryEncoderPCNT.cpp", which would overwrite it. 

The INO and Project being renamed to RotaryEncoderPCNTDemo.ino resolves this.

As discussed installing the library in Sketchbook\Libraries folder would have also resolved this, and ensures it can be used in other projects and the ArduinoIDE as well:
https://www.visualmicro.com/page/User-Guide.aspx?doc=Add-Libraries.html

There are multiple options if you want to encapsulate the library with the project, with the full Portable Solution route allowing the whole board package and libraries to all be contained with the project to avoid update chaos down the line:
Manual Library Capture with a Project: https://www.visualmicro.com/page/How-to-Encapsulate-Libraries-Within-a-Solution....
Complete Portable Solution: https://www.visualmicro.com/page/New-Arduino-Portable-Solution.aspx