Do case statements inside a for loop work in verilog

First, note that not all Verilog designs are synthesizable. Usually, only a very specific subset of constructs can be used in a design that is to be realized in hardware.

One important restriction that pops up is that every reg variable can only be assigned to in at most one always statement. In other words, regs have affinity to always blocks.

The following types of always blocks can generally be used.

always @(*) begin
    // combinational
end

always @(posedge clk) begin
    // sequential
end

In the former case, the * indicates that the block should be executed whenever any signal used in the block changes or, equivalently, that the block should be executed continuously. Therefore, regs that have affinity to combinational always blocks are implemented as signals computed from other signals using combinational logic, i.e. gates.

Registers that have affinity to always blocks of the latter type, on the other hand, are outputs of D flip-flops that are clocked on the rising edge of clk (falling edge if negedge is used). Inputs to the flip-flops are, again, computed with combinational logic from other signals.

Consider the following, somewhat contrived example.

reg out, out_n;
always @(*) begin
    out_n = !out;
end
always @(posedge clk) begin
    out <= !out;
end

Here, out_n is associated with the first always block, out with the second. out_n will be implemented with a single NOT gate that will drive out_n and be driven from out (note that it is a pure combinational logic). On the other hand, out will be driven by a flip-flop clocked from clk. The input to the flip-flop will again be computed by a NOT gate from out (which is driven by the aforementioned flip-flop). Optimizing synthesizers will combine the two NOT gates and use one NOT gate and one flip-flop.

Depending on the hardware you have available, other types of constructs can be used. For example, if the flip-flops have asynchronous resets, the following construct is also synthesizable.

always @(posedge clk or posedge rst) begin
    if (rst)
        // reset
    else
        // sequential
end

First you need to declare your EncodingNumbers. From the way you used it, I think you want it to be a memory:

reg [7:0] EncodingNumbers [7:0];

This makes EncodingNumbers a memory file with 8 elements, and each of those elements is 8 bits wide. Because you assign to it in an always block, you need to make it a reg.

Then, if you want writes to be clocked but reads to be asynchronous, you can do this:

// write operation
always @(posedge clk) begin
    if (EncodingMode == 0) begin
        EncodingNumbers[EncodingIndex] <= EncodingNumber ^ Masks[EncodingIndex];
    end
end 

// read operation 
assign EncodingResult = EncodingMode == 1 ? EncodingNumbers[EncodingIndex] : 8'bX;

The main take-away is, each signal that you control needs to be either a wire or a reg. You need to handle reg's in procedural code (always blocks) and wires in continuous code (assign statements).

Also notice that you didn't define what EncodingResult should be when EncodingMode is 0, so I just made it undefined --- you should put something else there, like 1 or 0.

Also, be aware, especially when using memories, if you're coding for synthesis (if going to implement the code in real hardware like an FPGA), you need to be careful to code things in a way that the hardware can actually match your code. If the memories in your hardware aren't able to do an asynchronous read (which is very common in FPGAs), for example, you will either get an error in synthesis (which is not so bad) or your hardware behavior won't match what you simulated (potentially much worse if you're not aware of it).