I solved the issue. I ran the following variable clean-up macro...
https://forum.keyboardmaestro.com/t/clean-up-delete-km-variables-km8/10673
... and afterwards KMFAM works great again. Before running the macro, I backed up my KM Variable DB and realized that the total size of my variables was about 30mb. With all the "excluded from environment to ensure the environment is not too large" engine log messages, I'm thinking that maybe the large number of variables was causing a delay and the KMFAM macro got ahead of itself somehow. Or maybe there was some issue with a specific variable that went away after the clean.
Nevertheless, it’s working again. @DanThomas thanks for your help!!