Stan, I would tend to agree that for most applications using one of the multi-relay boards with built-in opto-isolators is liked the easiest and most cost effective approach. However, if you are not afraid of a couple of the simplest components that exist, you can a resistor, diode and a transistor to boost the output current, and effective voltage to levels easily capable of driving most relays that might be practical for model railroad use. Most arduino boards will provide 50ma of current at 5v. With a 2n3904 (18 cents digikey, 5.4 cents Auction site) transistor you can boost that to about 200ma. Using a bit more robust Pn2222 (cents digikey, 10 cents Auction site) transistor you can raise that to up close to 1 amp.
As a side to this, if one was going through the trouble of boosting the Arduino's output current with a transistor like this, they could consider doing away with the relays all together and use triacs to switch the track power, though this would probably require a large heat-sink on the triacs. This is getting into the realm of overly complex, but it's something to throw out there.
Going back a little, rotary encoders are really nice, but you can do the same job with a standard potentiometer if you're using an arduino anyway. You can even buy pots with stops, and have quite a few positions. For example, the LionChief remotes use a 10K potentiometer with 41 positions. You can also typically pry out the stop tab on most normal pots to allow free rotation.
Other simple options that exist are to use up and down selection buttons, or to use a numeric keypad. one could also add a simple text display to show which track is selected, or of course you could use 7 segment displays, or standard LEDs.
Honestly once you incorporate a micro-controller in the task, the options for both the input options and the track powering side grow exponentially, and the costs of even the most extravagant options are more reasonable than the price of high current rotary switches.
Ine last solution, stepping completely away from the fancy electronics: If one is reasonably handy with some fabrication, you could build your own high current rotary switch. The premise being to have your control knob turn a disk below the panel with microswitches placed around the circumference of the disk. On the disk a small section would form a bump, or cam, that would press a switch when it is turned past that switch. I see a 10 pack of 16A microswitches on the auction site for about $9, so the over-all cost here is probably going to be around $20 ( +$15 per pole on the switch) to build your own switch. It may not be the most cost effective solution, but it would be a fun project for someone that likes to build things, and would allow a custom number of switch poles, and they could be positioned so that the "on" positions on the selector knob/dial match up perfectly with the positions of the actual tracks around the turntable. You'd probably need to add a separate on/off switch so that iach track is not briefly powered as you turn the knob past them. Here the micro-controller shines as it can easily be programed to delay powering a track for a half a second or so, so that only the position you stop on will be powered.
JGL