Does dairy in formula increase the frequency of ear infections and congestion?

No: That would be very rare. Dairy allergies can cause skin problems (hives or eczema), or more rarely gut problems (bloody diarrhea); there's also lactose intolerance, which occurs only in children and adults (never babies), which can cause diarrhea and abdominal pain. But food allergies very rarely cause nasal symptoms, congestion, or ear infections.

No: Dairy (particularly cold milk or ice cream) is a mucogenic (mucus producing food), but typically this is a fairly mild effect and does not result in increased ear infections, although it may result in some temporary congestion. This mucus producing response may be more pronounced in some patients and can be mistaken for a milk allergy.