After a great deal of searching, and help from Apple MobileMe Support Team, I have discovered a way to permanently delete the Contacts in MobileMe's Cloud and then sync them correctly with my iPhone 3G.
My problem, briefly, was as follows:
Despite extensively pruning the contacts in my Address Book, as well as reducing the number of Groups (and of course, backing it up as a precaution), none of the local changes were reflected in the data held in MobileMe. Not only did it retain all the old contacts (some 2400) and Groups, but it merged my current Address Book (modified with 'only' 1400 contacts) and Groups as well when syncing, although the inference when syncing from scratch is that I was overwriting ALL the data held on MobileMe.
Also I noted that ALL contacts added in the last two weeks or so, where I have added company names, phone numbers, email addresses AND birthdays and postal addresses, had all the extra data, birthdays and postal addresses and in some case even phone numbers and email addresses, stripped out by the time they appeared on MobileMe. All contacts with that information added PRIOR to this period appeared to retain all that data. In addition, the sync of the Address Book with my iPhone either had ALL the Groups but no contacts, additional Groups and some (incomplete) contacts or NOTHING.
My solution was:
1. As a precaution, make an archive backup of the 'Master' Address Book, File > Export > Address Book Archive.
2. Then, export the contents of the 'correct' Address Book as vCards, File > Export > Export vCard.
3. Delete ALL the contacts and Groups from the 'Master' Address Book and quit the application.
4. Open Keychain Access and search for ALL the files with *****@mac.com, relating to your previous dotMac Account, which will in most cases be duplicated by your new *****@me.com files. Either delete the *****@mac.com files or open them and modify the contents to reflect the change to me.com, saving or deleting each file in turn until there are no more dotMac files left. Then quit Keychain Access.
5. Assuming that you have more than one Mac syncing to MobileMe, in System Preferences > MobileMe > Sync > Advanced, "Unregister" each Mac in turn, leaving the Mac with the 'Master' Address Book until last. Finally, when unregistering the last Mac, the final question asked during this process is, "Do you wish to delete all remaining files on Mobile Me?", allowing one to remove Contacts, Bookmarks, Mail and Notes etc for example. Answer "Yes", and wait for some minutes whilst nothing appears to happen!
6. Sign out of MobileMe, System Preferences > MobileMe > Account, on all the Macs and reboot.
7. On the Mac containing what will be your 'Master' Address Book, open Address Book, which will of course be empty, and select File > Import > vCards, selecting your previously archived vCard export done in step 2.
8. Now comes the tedious bit! Create new Groups and populate them with the contact files. None of the contacts will have any photographs associated with them but I was content to leave it that way until I found out if the 'great plan' worked.
9. Once you have finished this task, backup the new Address Book by selecting File > Export > Address Book Archive and saving with a recognizable filename in case anything untoward happens. Then quit Address Book.
10. I then connected my iPhone 3G to the Mac, started iTunes and selected to do a full restore, without making a backup and giving the iPhone a different name in case there was any legacy 'association'.
11. As Syncing is switched off on the Mac, the default settings in iTunes enable you to create a new contacts list on the iPhone.
12. Complete the sync to the iPhone and unplug from the Mac.
13. On the iPhone, go to Settings > Mail, Contacts, Calendars > Accounts and select (or create) your MobileMe account. Slide the Contacts button to 'OFF' and wait whilst the confirmation runs. The other three buttons, Mail, Calendars and Bookmarks, should be 'ON'.
14. I then registered my Mac with MobileMe (System Preferences > MobileMe > Account using my FULL email address *****@me.com), then selected Sync > Bookmarks, Calendars and Contacts to sync Manually (initially), selected Advanced and then registered my Mac. Finally I selected Reset Sync Data, selecting to copy data FROM my Mac to MobileMe, overwriting any legacy data held on MobileMe's Cloud, before finally syncing.
15. Once syncing was complete, I then opened Safari and logged in to MobileMe and found that ALL the contacts were there! A couple of empty 'legacy' Groups were still there however and these I deleted.
16. I then cleared Safari's cache, logged out, quit Safari and rebooted the Mac.
17. Finally, one by one, I followed the same procedure on each Mac of deleting the contents of the Address Book, registering the Macs with MobileMe and selecting to copy data FROM MobileMe's Cloud to each, overwriting any data held on them.
It worked! It's only taken two weeks, days of head-scratching and bladder-distending amounts of coffee to cure the problem! I hope that the same solution, albeit long-winded, works for those of you suffering the same problems.
iMac 2.93GHz, 2x iMac 20" 2.0GHz, 2x MBP 15" 2.66GHz & MacBook 13" 2.1GHz on OSX 10.8. PM G5/1.8DP, 2x PM G5/1.6 on OSX 10.5.8. PB G4/867 12", PM G4/450 & PM G3/400 on OSX 10.4.11. iPod Touch & iPhone 4