I know this has something to do with parameter sniffing, but I\'m just perplexed at how something like the following example is even possible with a piece of technology that
It is a problem with plan caching, and it isn't always related to parameters, as it was in your scenario.
(Parameter Sniffing problems occur when a proc is called with unusual parameters the FIRST time it runs, and so the cached plan works great for those odd values, but lousy for most other times the proc is called.)
We had a similar situation when the app team deleted all old records from a highly-used log table on a production server. Removing records improves performance, right? Nope, performance immediately tanked.
Turns out that a frequently-used stored proc was recompiled right when the table was nearly empty, and it cached an extremely poor execution plan ("hey, there's only 50 records here, might as well do a Table Scan!"). Would have happened no matter what the initial parameters.
Our fix was to force a recompile with sp_recompile.