Set compression ratio to Extreme! \m/
The only issue now is really that from the phone itself you cannot assign a contact to a group - handy for new contacts, what happens at present is that the number gets saved into "My Contacts" group in Gmail and you have to move it in Gmail to a designated group afterwards. I have various groups like Business, Friends & Fam, Work etc and since all my contacts have mail addresses I just sync them all to the phone so all groups are there.
I read some Google Groups posts about this and hope it's a feature available in Donut!
Edit*
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I have tested Contacts saving from the phone directly and found the following:
When saving a new contact (say from a call list) the contact gets saved (after sync) to the first sync group (if you’ve not chosen a sync group then it gets saved in “My Contacts”). In my case the first sync group is “- Business” so my Test contact got syncd to that group.
If you only have a single sync group for Android, like "Phone" and put all contacts you want on the phone in there then there's no need to read on I guess but if you have multiple sync groups then do carry on!
Now since I have a lot of Gmail contacts this can be a bit tedious filing through on Gmail later if you’ve added several new contacts from the phone so what I have done is created a new group called “- Android Holding”*** so now when I save a new contact from the phone they sync to that group and added the holding group on the phone as a sync group (do this first).
This means basically that I can later go into Gmail and move new contacts from the “- Android Holding” group into Family, Business or whatever and since those groups are set to sync anyway the phone won’t know any different.
This is just an extra process to do for new contacts, an easy one too. At least until Google add the option to add new contacts to a group of your choosing from the phone directly anyway.
***
I have used a dash before the group names because this quickly sets them apart form the default groups in Gmail as I don’t use them since you cannot select them for sync in Android.