That was not to be. I spent several hours on the problem at work before finally deciding to clear out and take a different approach. I lugged a spare 1010 home with me and spent another three hours pounding on it until I discovered the problem. In this version of the Contivity software you not only have to tell it to hand out IP addresses to clients via DHCP, but you have to tell it which DHCP server to use. This part is buried in a sub menu of a sub menu and simply doesn't exist in the version of the software that we've been using on our older Contivity.
I emailed our Nortel engineer telling him that I'd worked out the problem and offering my opinion of the current rev of the Contivity software:
Thank you Contivity development team: you have officially passed the point where the nigh infinite profusion of features in your box has essentially crushed poor, unloved, little Miss Usability to death. <picks up skull> Alas, poor Usability, I knew her well.