Ok, thanks for sharing the data source. This is what I think is happening (but I may be wrong). These files you are downloading are not actually DTMs or DSMs. They are images of these models. You can tell since all the pixel values fall between 0 and 255 meaning that they follow the RGB pattern. This is why you are getting weird results with your contour lines. The actual DTM will have a value range of -1 to about 1700. None of the downloadable files show this data (they are all either jpg, png, or tiff and are all truly just images).
This is likely not the answer you are looking for but that particular dataset was not rendered for GIS use - just visual purposes. Your next best bet is to either use the USGS 10 meter DEM of the entire area (found within their rest services) or I found another Maui DTM (1 meter) within their rest services that is a true DTM of most of the island with a range of values from 2241 to -60:
In order to find that, you need to connect to the state of Hawaii ArcGIS server and browse through their image server. I hope this is closer to what you're looking for! (I cannot give a direct link to this image service but can perhaps provide a connection file).