I think my evidence points to this issue being related specifically to paramquery. Here's the evidence:
In my post I state that the <select> is modified correctly. My JS code is working fine at modifying the <option> tags. And the same code works fine when the <select> is outside of the paramquery control. This is only an issue when I try to modify the DOM of the built-in auto-generated paramquery <select>. That's why I think the problem has to do specifically with the grid's handling of the <select>
The exact same code runs fine on Chrome and FF and the grid <select> works as expected. Only IE (tested 8 and 10) causes the <select> to become unresponsive, and only when modifying the paramquery generated <select>. If I don't disable any options in the <select> the form control works fine. But as soon as I disable even one of the <option> tags, IE causes the entire <select> to become unresponsive. This does not happen if the <select> is outside of paramquery, so I don't see it as an overall IE issue, but rather seems to be specific to the paramquery <select> control.
One additional oddity. This issue happens if I disable the <option> using jQuery's prop() function OR using the attr()/removeAttr() functions. But if remove() the <option> entirely, the <select> behaves normally and the removed options are in fact gone. So the issue seems specifically related to making at least one <option> tab disabled.
Do you/have you ever written code to enable or disable the options in the generated select?