How many images, folders and subfolders are in the folder that you right-clicked on to replace the current Contact Sheet?
Oh, no, folders are only single level and, in some cases, only have a couple dozen images. But before posting the issue, I tested and retested across a number of folders. Behavior was as consistent as the sunrise. However...
I just went in to test again (PM has not been closed on my laptop since posting); tested across a dozen folders. Although it behaved as I posted in two instances, the behavior was as it should be across the rest (what's the emoji for egg on your face). No explanation. Folders have few images and all are single level. When it failed, I even waited on PM for a bit- had to close the Contact Sheet eventually with no mouse responsiveness.
At this point, I'm considering it a local issue of some kind, though baffled as to what/why. Sorry to have wasted your time.