why can't I increase steps in contour of this curve?

I am trying to use the contour tool to create shading as I have done before, but it is not cooperating on this curve (on left). The object on the right shows the effect I want. When I try to reduce the offset, I strangely get the message "contour offset too large" and then I can't increase the number of steps to get a smoother gradation.test.cdr

Here's a rough idea, but I have uploaded the file because the pasted jpg doesn't show the difference very well.

Can anyone tell me how to fix this, or is it just another buggy thing?

Thanks!