I suffered through this for almost a month. Here is the solution.
I used MyBackupPro to make a backup copy of the contacts on my phone. Spend the few dollars for this program. It is worth it in the long run.
Then, do the following that I found at this URL and added a few bits of info:
Android error: "Sync is currently experiencing problems. It will be back shortly." - Super User
- I used a free app called VCardIO to export my Contacts list in VCard format. Put that file on your computer by emailing it to yourself and download to your Desktop for use in step #3. Make sure you do this because all of your Contact info on your phone is going to be erased in the next step.
- Under Menu -> Settings -> Applications -> Manage Applications I cleared data for "Contacts Storage" (Might be called "My Faves" on your version). You now have no Contacts listed on your phone.
- Imported the VCard formatted contact list into GMail on my computer (bottom left hand side IMPORT CONTACTS, then find that file you emailed to yourself). This will merge what you have on your phone to your current Gmail Contact list. There may be some data is not saved in the merge, but most everything will be there.
- One your phone, program it to to sync your contacts again. Your phone will now populate with all of your Contacts.
I did this several days ago and have no issues with contacts syncing now.