Doug - You are correct, a slow operating stabilizer would still be switching to quickly for the needle on an analog meter to follow, but not fast enough for it to obtain an average reading. Obviously the only solution is to get a $900 o'scope to view the pulses - hmmm, makes a new stabilizer or a solid state replacement look much better. By he way, I saw somewhere of somebody placing a solid state regulator inside the original case.
The contact degradation is the same thing that plagues the points style SU fuel pumps. The points will develop a film that, if not cleaned off by the current passing through them, will eventually insulate the contacts one from the other. This is especially a problem with cars that are not driven regularly. Plus, over time, the points will just flat out wear away.
Cheers,