I just fired up my iPhoto 6.0.6 under Mt. Lion and I have no contact option in that version either. You'll have to upgrade to at least iPhoto 7 (08) in order to get contact sheets back. So you might as well upgrade to the latest iPhoto from the App Store.
If you also want the latest versions of iWeb and iDVD (which have been discontinued by Apple) you'll have to purchase a copy of the iLife 11 disc from a 3rd party retailer like Amazon.com: iLife 11.