In a given contract, should the "LockTime" timestamp include an extra hour for confirmations to prevent a double spend?
The nLockTime is the earliest time that a miner can include that transaction in a block.  It does not mean the exact time that both parties can assume final settlement has occurred.

You are correct to conclude that there is the potential for another transaction (with nLockTime = 0) to be broadcast and be in competition at the same time as the 
original nLockTime > 0) transaction.

But it wouldn't necessarily be a double spend, as the transaction seen later with the nLockTime = 0 would have had to have been signed by both parties.

If a "double spend" scenario occurs, it wouldn't be a surprise to either party.

The situation can occur where the two parties believe the nLockTime = 0 transaction will be the one confirmed and for whatever reason it doesn't get confirmed fast enough.  Instead then at the original transaction's nLockTime (roughly, as there is a couple hour leeway available to the miner as far as timestamp goes) that transaction confirms and thus the transaction submitted later (where nLockTime = 0) will never confirm.

So the normal confirmation level threshold (e.g., six confirmations) still applies to these transactions as far as final settlement goes.