First question, how do you store your contacts? Are they synced with either Google or Sony Ericsson? Do you have a copy of them on your SD card?
The thing that sorts out most software glitches is to do a factory reset, either on the phone or using repair function of PC Companion Support or Sony Ericsson Update Service. The only thing with this is that it wipes your phone so you need to make sure you have a copy of your contacts somewhere else so that you can reinstall them afterwards. You will also need to re-do things like email and download your apps from the market again.