Modify multiple JTextFields with a DocumentListener

Question 1

Document listeners should not modify the contents of the document; The change is already complete by the time the listener is notified of the change.

To fix this problem, use a DocumentFilter rather than a DocumentListener.

See this example Implementing a Document Filter

Question 2

As has already being stated, you should be using a DocumentFilter instead of trying to modify the fields using a DocumentListener

The sample below demonstrates the basic idea. I had lots of fun getting your decode/encode methods to work, so I wrote my own ;)

Check out MDP's Weblog for some additional examples and Text Component Features for more information (there's a section on document filters)

public class TestCeaserCipher {

    public static final int OFFSET = 13;

    public static void main(String[] args) {
        new TestCeaserCipher();
    }

    public TestCeaserCipher() {
        EventQueue.invokeLater(new Runnable() {
            @Override
            public void run() {
                try {
                    UIManager.setLookAndFeel(UIManager.getSystemLookAndFeelClassName());
                } catch (ClassNotFoundException ex) {
                } catch (InstantiationException ex) {
                } catch (IllegalAccessException ex) {
                } catch (UnsupportedLookAndFeelException ex) {
                }

                JFrame frame = new JFrame("Test");
                frame.setDefaultCloseOperation(JFrame.EXIT_ON_CLOSE);
                frame.setLayout(new BorderLayout());
                frame.add(new CeaserCiperPane());
                frame.pack();
                frame.setLocationRelativeTo(null);
                frame.setVisible(true);
            }

        });
    }

    protected class CeaserCiperPane extends JPanel {

        private JTextField encode;
        private JTextField decode;

        public CeaserCiperPane() {
            encode = new JTextField(12);
            decode = new JTextField(12);

            setLayout(new GridBagLayout());
            GridBagConstraints gbc = new GridBagConstraints();
            gbc.gridx = 0;
            gbc.gridy = 0;
            gbc.fill = GridBagConstraints.HORIZONTAL;
            gbc.weightx = 1;
            add(encode, gbc);
            gbc.gridy++;
            add(decode, gbc);

            ((AbstractDocument) encode.getDocument()).setDocumentFilter(new EncodeFilter());
            ((AbstractDocument) decode.getDocument()).setDocumentFilter(new DecodeFilter());
        }
    }

    public class EncodeFilter extends DocumentFilter {
        @Override
        public void replace(FilterBypass fb, int offset, int length, String text, AttributeSet attrs) throws BadLocationException {
            text = encode(text);
            super.replace(fb, offset, length, text, attrs);
        }

        @Override
        public void insertString(FilterBypass fb, int offset, String text, AttributeSet attr) throws BadLocationException {
            text = encode(text);
            super.insertString(fb, offset, text, attr);

        }
    }

    public class DecodeFilter extends DocumentFilter {
        @Override
        public void replace(FilterBypass fb, int offset, int length, String text, AttributeSet attrs) throws BadLocationException {
            text = decode(text);
            super.replace(fb, offset, length, text, attrs);
        }

        @Override
        public void insertString(FilterBypass fb, int offset, String text, AttributeSet attr) throws BadLocationException {
            text = decode(text);
            super.insertString(fb, offset, text, attr);
        }
    }

    public static String encode(String text) {
        StringBuilder ciper = new StringBuilder(text.length());
        for (int index = 0; index < text.length(); index++) {
            ciper.append(TestCeaserCipher.encode(text.charAt(index), OFFSET));
        }

        return ciper.toString();
    }

    public static String decode(String text) {
        StringBuilder ciper = new StringBuilder(text.length());
        for (int index = 0; index < text.length(); index++) {
            ciper.append(TestCeaserCipher.decdoe(text.charAt(index), OFFSET));
        }

        return ciper.toString();
    }

    public static char encode(char input, int offset) {
        char encode = Character.toUpperCase(input);
        if (encode >= 'A' && encode <= 'Z') {

            int min = (int)'A';
            int max = (int)'Z';

            int value = (encode - offset);

            if (value < min) {
                value++;
                value = min - value;
                value = max - value;
            }

            encode = (char)value;

        }
        return encode;
    }

    public static char decdoe(char input, int offset) {
        char decode = Character.toUpperCase(input);
        if (decode >= 'A' && decode <= 'Z') {

            int min = (int)'A';
            int max = (int)'Z';

            int value = decode + offset;
            if (value > max) {
                value--;
                value = value - max;
                value = min + value;
            }

            decode = (char)value;

        }
        return decode;
    }

}