First off, let me say that I like contacts on Ovi very much. The client is very usable and seems to anticipate the user in his/her choices - I especially hope that the way the network connection preferences are handled would become the default in Series 60.
Like many other users in the forum, I also would like to see more integration with the actual address book, although the separate tab works fine for me - I see it as a "sort contacts by availability" kind of view. Of course being able to start a phone call with a contact straight from the OVI tab would be uber-cool.
One thing I noticed is that when the "search for friend" doesn't find a match, one is given the option of sending an SMS to invite the person. At this point the SMS editor opens without any recipient, but it would great if it would actually look for the contact record of the person based on the search string, and prefill the SMS with the number. Or even suggest sending an email if the email address is available in the contact record.
In general, like others have said, what I find lacking is the ease of inviting others to the service, either from the addressbook or other IM services the user has. Solve this and you'll have a killer app on your hands ;)