Split from this thread.
I too, am having the exact same issue with contacts, starting a few days ago, but am using Windows Live Mail (2009) on a Windows XP system.
Email and calender events are syncing normally with Outlook.com and on an Iphone.
I notice that when I "Sync Everything" that all the email folders as well as "update Calender Events" appear in the box and are each checked in order. there is no listing for contacts.
I have done the Windows Live Repair from Control Panel.
Thanks for looking into this,
Robert Garrett