Which Daughterboard is suitable for expanding Encoders and I/O of a 7i96S?

[PCW, as usual, beat me to it]

Depends on whether you set up your 7i96s inputs with a common ground or common voltage.  Are your other inputs (limit switches, proximity sensors, etc.) NPN or PNP?

i.e. what is connected to terminal "I-COM"?

If you aren't sure, what other input components are you using?

Many thanks PCW and spumco! If I understand PCWs scenario correctly, I would need to supply common voltage to the inputs. As we haven't committed to any other input components yet, we would be able to adapt to this requirement. That would be PNP if I understand it correctly?

Either NPN or PNP type sensors will work but since the 7I96S only
has one common pin, all sensors/switch wiring must be the same.

The PNP sensor wiring scheme (7I96S Input common = GND) does
have a couple of advantages:

1. The inputs will work with low voltage sources such as 5V MPG encoders.
That is, you can mix input voltages so for example 24V for mechanical
switches and proximity sensors, and 5V for MPG A/B signals.

2. With the suggested Normally Closed (NC) switch setup,
a shorted (to GND) switch wire will show up as a fault.

Thanks a lot for spelling it out for me, having the advantages of one scheme listed like that is very helpful. Do I understand correctly that the instructions you specified above about the wiring of the ALM+ was for the NPN scheme?

Yes, I showed a NPN scheme

For a PNP scheme and  with all errors combined
you would wire the alarm outputs in series:

+24V --> ALM0+ 
ALM0- --> ALM1+
ALM1- --> ALM2+
ALM2- --> ALM3+
ALM3- --> 7I96S input

Note: with this wiring you need to be very careful that you
do not accidentally ground any of the ALM pins or you will
damage the drivers. If you are concerned about this, a say 1K
ohm 1W resistor can be added in series with the +24V connection