NAD 3220PE Terminal Distortion

Is this what you mean by the headphone switch? Just open up the plastic casing and clean it out?
 

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So I did a spray with the contact cleaner...
Headphones now sound distorted, the bad terminal sounds even worse, and the other terminals now intermittently distort.


It's still dirty, you just moved the dirt around. Spray it some more. Did you plug and unplug the phones
several times to give the solvent a chance to get into the switch contacts? That's necessary to do.

But the headphone connections are all soldered, so that's not from dirt.
 
I don't see how it can get any worse that it already is.
Try spraying the phones' headphone plug near the end of the plug, and then insert and twist it several times.
Of course, if the jack is badly corroded, the cleaning won't help.