This had been working fine in all of my earlier tests. So what changed? I lowered the density of the particles in the lattice moonlet. Earlier I had things set up to model a moonlet with a density of 0.8 g/cm^3. So the individual particles had a density of 0.8/0.7 g/cm^3. That makes them fairly high density and their gravity holds them together. For this most recent simulation, the lattice was made of smaller particles and it was set to model a moonlet with internal density of 0.5 g/cm^3. So the actual particles have a density of 0.5/0.7 g/cm^3.
I'm currently running another simulation with this lower density and a bigger moonlet. Stay tuned to hear if it falls apart. (Early indications are that it will.) Hopefully I'll know by tomorrow. If not, I'll definitely know by Monday. If it does fall apart, that will begin a search for what parameters are required to make it hold together.
The more interesting question is, what does this say about real moonlets? The simulation uses perfect, smooth spheres with no adhesion. So the moonlet has no internal strength. Only gravity is holding it together. What these simulations are indicating is that the bounds on what gravity can hold together might be lower than many people expect. Collisions might be more efficient at breaking things apart than had previously been expected. So are real moonlets higher density? Do they have real internal strength instead of being just rubble piles? What would either of these say about the formation scenarios for moonlets?
Update: The moonlet did indeed get broken up and start to shear out. Now I'm trying a moonlet using a lattice of larger particles. If that also gets destroyed then I will begin a search for the required internal density.