This sounds like you are saying "use ArcMap+Maplex not the Contour Annotation tool". I know all about label density and maplex labels; thanks for the reference all the same; that's what I have been doing until now. I want masks though -- I don't want lines running through the labels.
Outside of using the unloved broken tool, my understanding is that if want to mask the labels I must convert them to annotation. When I do that it drops 99% of the labels. So it is useless so far as well.
The lines through the numbers still beat ink on mylar.
I have messed around with all the options including putting labels into an annotation group in the map. Feature linked, in a database, convert unplaced... tried even "Selected features" after selecting all contours. Nothing.
Labels work, conversion to annotation fails. It comes down to either "it's broken" or "I am missing something". I've know I've done labels to annotation in the past with good results so I am just missing something. Usually I use it to fix up street names.