It is difficult for us to specify what your parameters should be. I would first try the default values and then make adjustments and reprocess step 2, if necessary. The definitions to the contour base, elevation interval, resolution, and minimum line size are below:
Contour Base [units]: It defines the reference elevation from which contour lines are generated upwards and downwards. It can be in meters or in feet according to the coordinate system used. This is typically set to 0 and is the default value.
Elevation Interval [units]: It defines the contour line elevation interval. It can be in meters or in feet according to the coordinate system used. It can be any positive value.
Resolution [units]: It defines the horizontal distance for which an elevation value is registered. The higher the Resolution value, the smoother the contour lines. However as the lines become more smooth the accuracy will degrade.
Minimum Line Size [vertices]: It defines the minimum number of vertices that a contour line can have. Lines with fewer vertices will be deleted and less noise will be produced. It will basically omit small lines based on the number of vertices.
The article below gives a little more detail in how to set up the contour generation.