I have two things to report. If we shut off ActiveSync contacts in iOS and configured a CardDAV account, all the contacts displayed quickly and flawlessly.
In the mean time I opened an email ticket and followed the process through with support. They identified the problem and tested a solution in their lab. Their proposed solution was:
1) Sort the CSV file and look for blank critical fields such as email address, first, last etc (ST support was somewhat vague about what fields are critical) The list in question actually produced about 5 "bad" contacts.
2) Add the critical information or delete those contacts in the CSV.
3) From webmail interface, empty out contacts and reimport the cleaned up CSV.
I have not had a chance to disturb the user again to test the proposed solution as the CardDAV option seems to be working fine. The user was quite aggravated for nearly a week so I am giving some buffer time before testing again. Why ActiveSync served from Exchange 2003 worked fine with the bad contacts will likely remain a mystery.