I set aside some time today to look into this issue again…and solved the problem!
Based on an article by Jeff Johnson (“Stop The Madness”) that specifically mentioned issues with ~/Library/Containers I simply deleted all folders in that directory containing the name Safari. Now Safari extensions load for all users on the M3 24" iMac.
Of course, I had to set up Safari again and re-install my bookmarks but that took only a few minutes.
Edit: fixed the link to Jeff Johnson’s blog.