Apparently the sync’ing with MobileMe had created its own group of contacts, of which came from my Outlook in the first place, and iTunes created the other.  Both were exactly the same, that is until I changed a contact attribute in one group.  This was no way to arrange contacts, since searching, VM, and other areas would confuse me as to which contact from which group I was working with.

The solution?  First, don’t do it at all, but if you already have…..

1) Go to Outlook and navigate to Data File Management from the File menu.  Create a new PST (Personal Folders) in Outlook, set it as default, close outlook and reopen.  Go back to Data File Management and remove the pre-existing PST.  Don’t worry, Outlook does not delete the file.

2) Dock your iPhone, go to iTunes, select your device and jump to the Info tab.  Select Contacts from the Advanced section,  and then re-synch with your phone.  When that is done, uncheck Synch contacts, and possibly Calendar as well.

3) Now you have to go back to Outlook and remove your new empty PST and re-add your old one.

What you have done is forced iTunes to clear the existing Outlook contacts with an empty set and only maintain contacts via MobileMe.  I would assume this might need to be done for the calendar as well.