Problem with devices running IOS 5.1.1, but not 4.2, where it works as expected.
Anyway, this worked....
1) backed up address book … File>Export
2) deleted all contacts in address book
3) deleted all files within: library>user>application support>address book
4) unticked sync contacts in iTunes - synced with device
5) open address book: import file (the backup file)
6) open iTunes: tick sync contacts and sync'd