I had one of those weird bugs on my windows phone 7 where the phone would report an error 800C0069 and would fail to synchronize on the primary account. This can be a major headache as there is no way to remove the primary account on Windows Phone 7 without doing a complete reset. I also noticed that immediately before the error it would give a message about contacts 0/1. So I turned on full logging to try to get more details, but never could find how to get the actual log file.
Eventually I narrowed the problem down to my girlfriend !! Turns out it was her entry that wasn’t synchronising for some reason. I wiped the phone of all other contacts, but the phone wouldn’t let me delete her contact card: I could modify it, but every time I tried to delete it the people hub would immediately close. Conspiracy theories running wild …….. 
Finally, after searching the web for a while, I came across a fix that at first seems so crazy, I’m still left wondering how someone even found it. You go to Settings, Region & Language, and change the System locale. You’ll be prompted to restart. After the restart you can change the system locale back, and magically, hey presto everything should be working again !!!
I re-synched mine and all my contacts are back. I’m guessing the problem is/was there is a file that tracks changes ready for the next synch; and that file got corrupted somehow. And maybe when you change the locale, that file is deleted, which then gives you a clean state to start again. Anyway it works, bizaree as it might be. Kudos to those that found this.
In the emulator in the tools SDK that is 
Still waiting on the actual phone update, but for developers the tools update is now available from:
http://www.microsoft.com/downloads/en/details.aspx?FamilyID=49b9d0c5-6597-4313-912a-f0cca9c7d277&displaylang=en