Here's my contribution to help repay all the good info I've gotten here.
In the field we didn't have the elevation yet, and so just started with our reference point on elevation 100. Later we ran the elevation in to the reference point so now we know a difference.
In the office we imported the points and did a draw/locate. Then we did a point translation only on the z axis to move the entire point set to the proper elevations. Then we contour and the contours are labeled as if the points were never translated vertically.
After an hour or two of thrashing around and looking for a solution we figured it out for ourselves: (1) Turn off all the layers except the point layers (2) Select and delete all the screen entities for the points (3) Turn the appropriate layers back on. (4) redo the draw/locate (5) Redo the contours. Now it should work.
It is possible that this isn't a contour bug at all, but rather a point translation bug.