Organizing and accessing contact information in Outlook.com
Hi Radio Flyer,
Update May, 2013: We've released some changes this month on how you navigate around the People page. These changes were made to make it more consistent with how your contacts are presented. The Groups' dropdown menu have been removed and Groups have been integrated to your contacts list. Please see screenshot below which I hope clears some of the changes up for you.

NOTE: You can also search for your group by typing the group name in the search box just like searching for a contact.
The next screenshots shows how you can add a group member


After clicking save the screen refreshes and you should see the new member on the right pane.
Hope this helps. Please let me know if you have follow up questions.
Thanks