Organizing and accessing contact information in Outlook.com
CBroda,
May have found a resolution to your issue.
If you set the default group on your iPhone to your Outlook account, in Settings>Contacts>Default Group...
Then all new contacts will show up seamlessly. If you want to move old contacts, then you will need a contact mover application. They can be found on the app store, and it was worth the few dollars it cost.
Figured this will help you, or anyone else trying to fix this issue.
I have the same issue and tried your suggestion. However I do not find a default "Group" in the path you gave. I found only a "default account" and the only options there are "Private" and "From My PC". I selected the "From My PC" option and the contacts still did not sync UGh.
Has anyone found a solution yet????