I am having the same problem.

Using MS Outlook 2003 Windows XP.

When I go to Contacts, it shows all my contacts - and there are over 100.  I
can view, edit, etc all the contacts just fine.

But I have problems when I go to send a new email.  I click on "New", which
opens a new email.  I click on "To", which opens the "Select Names" dialog
box.  Only 4 contacts are listed.  These contacts have nothing in common.  
One is a new one I just added.  One has been in there for years.  They are
all in different categories, or no category at all.  

I have "Contacts" listed as "Show names from" - if I select "Outlook Address
Book"  it says there are no names listed.

I first noticed this a few weeks ago - only a few names were missing.  Now,
almost all the names are missing.  I too just went through and added
categories to all contacts - but the ones showing do not share categories,
and other contacts from the same categories are not showing.

This problem also coincided with re-formating my computer (I reformated,
then assigned categories a few days later).  I restored the contacts by
syncing my Palm with Pocket Mirror - one time.  All contacts were showing in
the Select Names dialog at the time of resyncing and for a few days after.  I
have not resync'd since.

Before the re-format Outlook was working normally with Pocket Mirror
installed.

I updated my Outlook and Office versions to the latest versions - problem
still exists.

Hopefully I have given you the necessary details.