Green Lantern, I think all your contacts were SUPPOSED to be deleted in the device, then re-synced back onto the device after resetting sync history. The advice to carry contents onto desktop to retain the data contents was good and should assure you didn’t lose your contacts/data if you go back to it again.
As it happens, Marlinfromnull's advice did not fix my problem, but equally it did not damage my Address Book data or ultimately the Contacts (which were all deleted temporarily on my iPhone, also).
Another precaution against losing all your Contacts is to export your entire Address Book as an archive (on Mac that's a function under File menu) so it can be imported back in again if things ever go pear-shaped while trying to fix the issue.
After trying many fixes (including Marlinfromnull's) unsuccessfully, my fix happened by doing the following process FOUR times in a row until it stuck:
1. Make archive/backup of total Address Book data incase you need it later on to restore.
2. Plug iPhone in to computer and turn off Contacts syncing then sync again choosing option to delete all contacts when asked. All Contacts disappear off iPhone after syncing.
3. Disconnect iPhone from computer and do Hard Reset (holding down Power and Home buttons together until white apple appears onscreen).
4. On Mac (or using your computer's equivalent functionality), open iSync> Preferences and click "Reset Sync History") button. Wait for it to complete when the button goes grey.
5. Do Permissions Repair. (I have no idea what difference this makes, if any, but it's what I did out of desperation!)
6. Restart computer and launch iTunes.
7. Plug iPhone into computer again, turn on 'syncing contacts' again, and sync.
8. Contacts should now be back in iPhone. (At this stage, I checked some of the edits I'd made and the old data was still in there, so...)
9. Again... disconnect iPhone and do hard reset. Delete all data from Address Book and Import the backup archive to restore the all Address Book contacts.
10. Again... open iSync and reset Sync History (see #4 above).
11. Restart computer, reconnect iPhone, in Tunes set to 'Overwrite Contacts on next sync'.
12. Sync iPhone.
That entire process 4 TIMES!!!! One after the other. And then suddenly, as though there'd never been any issue, all the correct (newly edited) data was on the iPhone and as well as in Address Book in the computer. And it's been fine ever since.
Go figure...
Now, I'm no techie, and I was just deperately shooting from the hip to fix the problem, and I'm sure there are a lot of unnecessary wasted steps in that process, BUT... it did work for me, as tedious and frustratingly unassisted it was.
How is it that someone like me has to wade around neck-deep in unknown tech sludge to fix (what MUST be) a very simple problem in a device that's been designed, developed and provided by such a techno-capable company as Apple Computer, who should have an answer to such simple things when they have such techno-capability at their fingertips? How is it that a techno-dumbie like me can fumble around in the metaphorical darkness and achieve what Apple appears unable to? Remarkable. Dumbfounding.
So there you have it. For what it's worth.