We present a polarization discriminating interferometer, where the test and reference beams are encoded in orthogonal coherent polarization states. The optical signal output from such an interferometer has a normalized degree of polarization (P') that varies monotonically as the optical path difference (OPD) between the test and reference paths is increased from zero. We analyze the interferometer output using a novel Stokes polarimeter, employing two switchable ferroelectric liquid crystal (FLC) wave plates and a polarization image splitter to effect the polarization transformations required for a full Stokes analysis. The addressing time of approximately 100 microseconds for the FLC waveplates, coupled with the image splitter, allows data to be collected in three video frames. Manufacturing tolerances inherent in the FLC waveplates, together with alignment errors in the optical system, lead to errors in the measurement of P'. We examine these errors and show that their result is to cause the relationship between surface height and measured P' to depart from the monotonic ideal form, thus reintroducing ambiguity into the measurement system. We present a numerical correction term which allows us to recover the correct P' value from the measured data, thereby returning us to an unambiguous surface profile. We will show profiles taken from surfaces with step discontinuities of several lambda, demonstrating the system's ability to resolve these height differences.