Thanks for further suggestions. After complete uninstall I did a reinstall from scratch in the same VM (making sure not to use default environment variables in the main program, only help files and library wizard ticked on), re-specified the path variables, copied the fplib table back in. This time it responds as Sprig describes in the quoted message below, even with multiple models specified for one footprint. (That is a feature I recently used in another project, it worked OK in 4.07 too.) What was symptomatic is that before uninstall the brackets were not accepted for the alias in the 3D search configuration dialog. As before though, when I reenter the dialog, the alias I added is gone.
I am getting a feeling that it should not be necessary by design to add the environmental KISYS3DMOD variable already specified in order to have the 3D models appear with relative path, and that this dialog is there to add aliases for paths that are not in the environmental variables, thus the latter are grayed out. The move up and down commands do not work on these, I get a "No entry selected message in response.
Unfortunately I did not try adding a footprint this time without specifying the 3D path variables to see if that worked now without specifying the already existing path configuration. I also left out specifying some custom names in the Path Configuration. I can not find the KISYS3DMOD variable specified in any of the configuration files or the project profile or the KiCad profile except the standard one in KiCad_common, so likely my action of specifying the default KISYS3DMOD as 3D Search Path Configuration had no effect anywhere and it works without it.
So in conclusion I likely had some corruption that caused the problem, but I need to keep a watch on this. Thanks for all the help to solve it.