Shutdown function interferes with hack header/i2c?

I want to use i2c (for If i plug the encoder breakout into the hack header, it immediately triggers a shutdown.

Can i redirect this, or do i have to disable the shutdown functionality with the DT overlay? Will that even work?

If your plugging it in while the Pi is powered up and running, you shouldn’t do that.
The basic shutdown dtoverlay dtoverlay=gpio-shutdown is disabled if i2c is enabled.
With i2c enabled you have to set the pin used for shutdown, like this,
If you do that you don’t want to use pin 3. If you do, stuff like what your experiencing will happen.

Switched the gpio-shutdown to 26, saved, shut down, removed power, hooked up 3v3/sda/scl/int/gnd from the encoder breakout to the hack header, pi won’t start up. Red button turns on, then directly off when i try to power it up. If i remove the header, pi will start as normal. Going to have to troubleshoot on a non-hatted pi.

Is there a way to pass the new shutdown pin thru the picade hat after switching the gpio_shutdown overlay? The pinout for the Picade hat says gpio17 is used by “power button”, and only gpio-26 is unused.

I have no idea what is going on? Adding an i2c device to the hack header shouldn’t effect the Picade Hats shutdown function. Not as far as I know anyway. And the shutdown function may not be done via that overlay?
Was there a shutdown dtoverlay entry there or did you add one? If you added one I would remove it.

I thought pin4 interference was causing the problem with the rotary encoder breakout, due to the pinout for the picadeX hat ( showing gpio4 labelled as “shutdown” but having the same problem with the encoder on a base pi as well, so it’s most likely a problem with the encoder.

Ok, pin 4 being used for shutdown isn’t what I was expecting? I should have looked at the pinout before posting. Sorry about that. I goofed on that one.
Good pratice would be to use a different pin if i2c was ever going to be used.