"SD. Can there really be any residual momentum left from the preceding figure by the time you reach e/o 2 of a drag hesitation."
Sure. In the swinging waltz figures, that residual momentum carried through from the previous downswing is where the upswing comes from. Since this is not as swingy in character there would be less residual momentum, but there may still be some. Actually, a common problem would be retaining to much of it.
"I would have thought frictional forces arising as the last step of the precede is placed would have dissipated that."
Only if the dancer specifically intends to dissipate it. And it's not dissipated into "friction" against the floor, because there is no weighted sliding action where floor friction would become dissipative. Instead it's dissipated by using the muscles to resist the movement.
"Surely the thing about human gait is you have to keep generating force to keep moving"
This is extremely mistaken. The human gait is effective at retaining movement energy across steps, and the dance version of it even more so. That's what makes good dancing look smooth and effortless - the highly developed ability to carry the energy from a downswing through a step or two and then into an upswing, WITHOUT dissipating and regenerating it.
But as the drag hesitation is not a very swingy figure, most of its commencing momentum will be dissipated, and the eventual rise will instead come mostly from the muscles rather than from an upswing release of retained momentum.