I did this and it worked, so I'm grateful for the workaround. But I hesitate to give a thumbs up for what is certainly a bug in the Constant Contact system. The fact that you can create a brand-new contact with the email address without any problem of permission or compliance-hold means you SHOULD be able to just update the email address as desired without all these intermediate steps. Ideally, you need to report this as a bug and get it fixed. Thanks.
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