Yes, the President could pardon Ms. Taylor or any other person for Contempt of Congress. That would squarely end the matter for that particular act of contempt for the person pardoned.
That would not necessarily end the matter for the President, however. Under our system of checks and balances, Congress has two tools it can use to limit the President’s contept power.
First, though the pardon power is in the Constitution, the Constitution can be amended by Congress and the States, the President having no involvement with the process. If a President gets too high-handed with issuing pardons (like for example, broadly pardoning his Cabinet or White House staff on the last day of his Presidency), the Congress may be moved to limit the pardon power by amendment, and the States may approve. (As an example, when he was Governor of Texas, President Bush’s state pardon/clemency power was quite limited because the Texas political process disapproved of the clemency granted by his predecessors.)
Second, Congress has the power of impeachment, which has been held to be an essentially political power. In other words, though the Article IV, Sec. 4 of the Constitution says “The President . . . shall be removed from Office on Impeachment for, and Conviction of, Treason, Bribery, or other high Crimes and Misdemeanors,” the Supreme Court has said that Congress has the sole power, in its legislative judgment, to determine what is an impeachable “High Crime and Misdemeanor.”
To date, nobody has seriously suggested that the impeachment of Scooter Libby might be the basis for impeachment, though Rep. Waxman has convened hearings on the use of the pardon/cemency power, which could, potentially, lead to a Constitutional amendment.
If, however, the President directly challenges Congress by pardoning those Congress holds in contempt, particularly if the contempt findings are upheld by the court system, it is more likely that Congress will be moved to exercise its impeachment power.