i am very sure that you will not be able to create a high resolution
dem from contour maps, neither do i think that satellite imagery will
work. the common way would be laser scanning from a plane. notice that
creating a dem will be pretty expensive .
required resolution depends on the tasks you need to perform. we have
made the experience that 1 m resolution might not even be sufficient
if you want to perform detailled modelling of surface pathways as
structures that influence flow tend to be even smaller (e.g. kurbs).
in this case your data will need to be imroved by field surveys. you
may want to use a tin in this case rather than a dem.
for estimation of catchments a 1m dem will work perfectly fine even in
urban areas. however some manual adjustment from map data and field
surveys is required in this case, too. other problems may be pathways
crossing houses (in case of the dem), pathways blocked by vegetation
(in case of a surface modell) or pathways blocked by railway tracks or
streets.
the amount of work required for data preparation very much depends on
the results you are trying to achieve.
best,
roland