I've been thinking about this and I'm going to wait to actually use the phone and see how the contacts work. It sounds like palm is trying to make a paradigm shift in the way contacts are handled/used. This sounds similar to when gmail came out and it was different in that they didnt use folders, instead they came up with the idea for labels.
I'm a creature of habit and since I always used folders I resisted changing my ways for a long time because it was different and what I did before worked for me. Finally I gave in, and decided to try using the labels. Turns out, I really liked the concept and found it more productive for me than using folders.

Anyway, my point is that it looks like Palm is doing the same thing with WebOS, trying to change our idea of what a phone contact list is. Is it for the better? I think that has yet to be determined until the phone gets into the hands of actual users.

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