I would have to get the data Tom - I just built a sideslope template the same as yours in 5.32 and it seems to work just fine for me - I really don't see how this can happen - unless the source line is not curvilinear - i.e. if the source line is chorded then maybe I can see how it could happen, however your offsets for the "near vertical face of curb are large enough to not trigger this issue in most normal cases.
can you vcl out the line that you are using for the Flow Line and send it to me and I will try it myself on your line
Looking at the image of the 3D surface, the flow line doesnt look at all smooth - do you have some linework in there that is not joined sequentially or that double backs on itself - use the linestring editor to step sequentially through the horizontal nodes of the linestring to see what the sequence looks like, also if that was a curve line I would expect the spacing of the flags to be equal which it isnt, indicating that the problem is with the source line itself - I think you will find that that is your issue here - but send me the line to take a look at unless you find the problem yourself here.