Make sure the firmware you are using is compatible with the PEP version you are running. They added the ability to assign actions in PEP2 and I think it required 7.2.22 or higher for this.
If the firmware is up to date with the version of PEP you are using, you may have a broken wheel.
When you turn the wheel, listen for small faint clicks. If you don't hear them then that means the mechanical switch on the main board has likely broken off and is rattling inside. The solder joints on it could be broken if you hear a faint click but nothing happens (means the switch still on the board but maybe not working).
The only way to know is to take it apart. Email me if you need a service manual that explains how to do this.
FYI, I don't recommend using the scroll wheel for tracking unless you have the metal/pseudo metal smooth scrolling wheel. On the plastic wheel, I use Jog on AppleTV. I often find myself jumping forward/backward just picking up the remote.
