In Learn to Play, Setup is defined as:
1. Shuffle Decks
2. Place Heroes and Set Threat Levels
3. Create Token Bank
4. Determine First Player
5. Draw Starting Hand
6. Place Quest Cards
7. Perform Scenario Setup Instructions

My assumption for contracts would be: 8. Perform Contract Setup Instructions?

The rules for contracts say the following:

Quote

…each player may choose one contract to put into play along with his heroes at the beginning of the game with the "A" side faceup.

This is step #2 in the list above.

(This raises the question of what exactly happens if you choose a Guarded (X) attachment for the Grey Wanderer contract, as the encounter deck isn't really set up at that point to grab a guarding card from…)

3 hours ago, sappidus said:

The rules for contracts say the following:

This is step #2 in the list above.

Is there a timing difference between "choose one contract to put into play along with his heroes ..." and executing the contract's Setup?

To answer that question, I was trying see if there was a timing difference between "2. Place heroes" and looking at Heroes that had a Setup:

Denethor (Leadership): Setup: Add 2 resources to Denethor's resource pool.

Eowyn (Tactics): Setup: Reduce your threat by 3.

Smeagol: Setup: Shuffle 2 copies of Stinker into the encounter deck.

Thurindir: Setup: Search your deck for a side quest and add it to your hand. Shuffle your deck.

As heroes go, Thurindir is probably the closest in question. Do I:

2) Place Thurindir and execute his Setup, adding a side quest to my "empty" hand, then

5) Draw Starting Hand

My questions of when and timing stem from the The Grey Wanderer contract. Can the Setup of The Grey Wanderer contract be played after "5. Draw Starting Hand"? I would like to find out what is in my starting hand before "Search your deck for an attachment ..." If the answer is No, the Setup must be played before drawing your starting hand, The Grey Wanderer contract creates a dilemma the way it is printed. It does not say "Shuffle your deck" after searching. Therefore you get the chance to "see" your starting hand as you are searching for the attachment.

3 hours ago, sappidus said:

(This raises the question of what exactly happens if you choose a Guarded (X) attachment for the Grey Wanderer contract, as the encounter deck isn't really set up at that point to grab a guarding card from…)

I had a similar question of "can we use a Guarded (X) card without needing to guard it?" Looking at Guarded (X), it says "enters play" and the The Grey Wanderer contract says "put it into play", so I assume that might mean we still have to guard it.

You have touched on several different points here. I will try to address the big ones.

5 hours ago, bdavis969 said:

As heroes go, Thurindir is probably the closest in question. Do I:

2) Place Thurindir and execute his Setup, adding a side quest to my "empty" hand, then

5) Draw Starting Hand

Yes—the fact that all hero Setup effects are executed at step #2 is detailed in this thread (including some curious things about the nature of mulliganing in the Thurindir situation):

I see no reason Contract Setup effects would occur at another time, given that they're put into play at the same time as heroes and also say " Setup :".

(FWIW, please note that this is somewhat different than some of the Setup stuff in the Sagas re: boons/burdens; this can be chalked up to the original Saga releases predating the first hero Setup effects by a couple of years.)

5 hours ago, bdavis969 said:

If the answer is No, the Setup must be played before drawing your starting hand, The Grey Wanderer contract creates a dilemma the way it is printed. It does not say "Shuffle your deck" after searching. Therefore you get the chance to "see" your starting hand as you are searching for the attachment.

This is covered by FAQ 1.21, Search Effects —you still have to shuffle even though Grey Wanderer does not specify as such, as a card effect has to explicitly say not to shuffle for you to skip it. (Except ally Galadriel? Ha. No one is calling every bit of card text in this game perfect…)

5 hours ago, bdavis969 said:

I had a similar question of "can we use a Guarded (X) card without needing to guard it?" Looking at Guarded (X), it says "enters play" and the The Grey Wanderer contract says "put it into play", so I assume that might mean we still have to guard it.

I have several thoughts about this, but I think it'd be pretty fruitless to overly pontificate the issue, as I'm going to officially inquire as to the designer intent anyway.

Sappidus, thank you for answering all my questions. You are a wealth of knowledge. It will be interesting to see what they come back with regarding Guarded (X) cards being used as the 1 cost attachment.