So you have no optical sensors? Presumably that is why the encoder wheels aren't mentioned. Suspect the base, motors, wheels, encoders etc, are a pre-bought kit from elsewhere, and the electronics are supplied by Digistump and added to the base to make a robot kit. The reason the encoders are there is because they were part of the hardware kit Erik bought. Looks like Erik chose not to add optical sensors to the electronics parts he added, but you could always add those yourself.
Suspect the bulge on the motor casing is just the axle or part of the motor. Wouldn't expect capacitive sensor in there.
I did wonder if the little cut outs on either side of the encoder wheel slot where designed for the optical sensor to slip down over the encoder wheel from the top. Clearly in the Digistump tutorial, they put a cable tie across there instead to tidy up the cables. However this is just guessing since I can't see where the encoder wheels come to in relation to the slots in the base. Maybe try adding the encoders to the motor, then take a photo for us to see how that looks. maybe we can then work out between us how it should look.