Is it possible to have multiple (3) sonar sensors and 2 encoders on one microcontroller? There are enough spaces but they dont seem to work at the same time. Need all these sensors for this project. If its not supposed to be possible is there a workaround?

It should work.
Though you have to go to the motors and sensors setup and name and set the ports to whatever sensor you're using because different sensors have different values, sonar = inches and button 1 or 0.
If you don't assign the sensors to what they are, the robot will read them as 1 or 0 as a button.

I understand that. Heres my current problem. robotc only allows for interrupts 1 and 2 to be used for sonar. I need one more. Why is this? How do I fix this? See attachment.

The Ultrasonic Rangefinder / Sonar Sensor relies on timers internal to the VEX to track how long it took for a pulse it sent out to bounce back. The reason that you're limited to two sensors, is that there are only two of the timers.

This explanation is pretty close. ROBOTC relies on "edge triggered" interrupts for detecting the response from a SONAR sensor. Only the first two of the PIC microchip's six interrupts can be edge triggered.

The other four generate an interrupt on any transition. And the interrupt is "there's been a value change in one of the four interrupt pins". So it is up to the firmware to figure was it a high to low transition (that's what is desired) and on which pin. The code for this is not terribly complicated, but it is not something that has been implemented in ROBOTC firmware at present because of the low usage.