Assuming Outlook 2003, here.
Judy Gleeson has provided the following workaround to overcome the new way
Outlook 2003 sorts the "By Category" view:
Use the Detailed or Simple List view, show the columns you want to see
(field chooser), click the column (eg Last Name) you want to sort by, THEN
use the group by box to group by Category. That should have alphabetical as
well as the grouping.

Signature
Russ Valentine
[MVP-Outlook]
>I need to sort my contacts by field(ascending/descending) while still
> grouping them by category. Every time I hit a field at the top of my
> contact
> list it will sort, but this also removes my grouping by category. ???