From my experience I feel pretty comfortable saying that contact sliders adjust how frequently hitter make contact with the ball when they swing, but no not effect the contact of the quality. I've been playing with CPU contact at -50 on MVP and the CPU still manages to routinely pound out 12-15 hits a game against me. Now maybe I just suck at pitching (a distinct possibility, though I have meter difficulty maxed and fatigure at 25 in an effort to drain more stamina from pitchers so you can't use the same relievers every day) but I don't think so. I see far more swings and misses from the CPU when I lower their contact and I seem to make more contact when my contact slider is raised.
Power seems to work just like you think it should. The lower the slider the less far the ball travels on impact. I have the CPU currently on -45 and myself on -30 (MVP level) and the dispersal of homeruns is roughly even, averaging probably 1.5 per team per game. If anything I should probably lower this a little bit for both of us. With the sliders I am currently using I am seeing the CPU put up really good offensive numbers and scoring frequently without the use of the home run.