My primary thought after pondering this post for a day is that it comes from a place of immense dance privilege. That it was written from the perspective of someone who has, at least occasionally, the opportunity to dance a wide range of different levels of contra, styles of contra, etc. I will always remember the night in the Boston area c. 2010 when the caller (in my head it was Lisa Greenleaf) changed the dance mid-dance and called contra corners into a diagonal hay and the whole hall just did it without missing a beat. It felt so engaging, so sneaky, so good! Where I dance now, the only event in a year where we could possibly get away with contra corners into a diagonal hay (and only with a walk through) would be a challenging session at the annual dance weekend. Because as you say, it either takes too much time teaching to do in another context, or too high a baseline dance level. But those extra teaching minutes are worth it to get some of that shake-up, explore-the-form, push-the-limits feeling once a year.
The same situation applies to people who are constrained by something other than a smaller/more typical-level dance scene, for example people who are only comfortable dancing at queer-normative events or who get around only by public transit. It's really nice if there's a wide variety of options available at a dance weekend (and yes, ideally multiple tracks to facilitate this) so that we can have a few moments of that feeling.
ETA: I think the only 'challenging' type session I've ever truly disliked was the one I once attended at Flurry, which is exactly where you call out it should be OK: but I think the room (which was not even in the venue) was just too weird for the caller to gauge skill level or for anyone to be able to move comfortably.
I've played a lot of dance weekends over the years [1] and if I could change one thing it would be no more challenging sessions. I see it happen every time: it's a great crowd of people, with a wide range of experience levels, and Saturday afternoon is going well. Then it's time for the challenging / advanced / experienced session. What happens? The dances are too hard for the crowd and it's not fun.
The callers had already been selecting dances that worked well for the group, which meant material that was interesting but not a struggle. Push the difficulty up from there, and what gives? You can take longer teaching, perhaps four minutes instead of two, which lets you explain material that's a bit harder, but only a bit and at the cost of a lot more talking. You can call no-walkthroughs, medleys, or even hash, but at most dance weekends you can get away with that at a regular session (and if you can't it won't work at a challenging session either). Or you can call material that's too hard for the crowd, and it falls apart in places.
To go well, challenging sessions can't just be a matter of picking harder dances, they require a group of dancers who are up to the challenge. This can work as a one-off event or even a whole weekend, where you communicate clearly what people should expect and people can self-select. It can work at a festival where you have multiple tracks and people can easily choose something else. But none of this applies to most dance weekends, since they only have one hall.
I think the desire for challenging sessions comes from two places. One is that some people just really like challenging dances, and I think the best you can do there is challenging-specific events. The other, though, and I think this is a bigger factor, is that a whole weekend of contra dancing can be a lot of the same. So if you're looking for ways to add some interest to the schedule without forcing the caller to choose between "that's not actually challenging" and "it's not fun when the dances fall apart", some ideas:
Teaching sessions, where the caller focuses on demonstrating a new skill. There are tons of possibilities here, including how to help a lost neighbor, role swapping, partner swapping, flourishes, swing variations, momentum and weight, and supporting other dancers in and out of moves.
Games sessions, where the caller has you do something unusual but also fun and educational. One session might include, sequentially, some dancers leaving the hall for the walkthrough, pool noodles, blindfolding, ghosts, sabotage and recovery, and teaching a different 1/4 of the dance to each 1/4 of the dancers.
A session of Chestnuts, Squares, Triplets, Triple-minors, or a mix of different unusual formations.
Early morning family dance with acoustic open band.
A "marathon" session, where you medley one dance after another and people typically drop out every so often to rest and swap around. Make sure you coordinate with the band(s) to ensure this is something they'd be up for playing for; it's not the default deal.
Play with tempo. Show the dancers what tempos from 104 to 128 feel like, and try the same dance at multiple tempos. Practice dancing spaciously at slow tempos, and with connected and efficient movement at fast ones.
You might notice I didn't include themed sessions like "flow and glide contras" or "well-balanced people". The variation in feeling from one dance to the next is key to keeping contra dance interesting, and while sessions that explore just one area still work, I personally think they're much less fun.
[1] I count 70: 54 with the Free Raisins and 16 with Kingfisher.
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