Is the place where you "deselected contacts" is on the iPod's Info tab, with the checkbox that says Sync Contacts?
If so, and that did not work due to some data issue on the iPod, you may need to do a Restore on the iPod from the iPod's Summary tab in iTunes. This will erase the iPod (including that contacts data), re-install its software, and set it to default settings. Since you are using automatic syncing to load the iPod, all of your songs and other content must be in your iTunes library, so it should not be too tedious to set up the other tabs to sync like before.