To delete the Contacts folder from the Address Book, do the following:

1. On the Tools menu, click E-mail Accounts.
2. Click View or change existing directories or address books, and then click Next.
3. Select Outlook Address Book, and then click Change.
4. Select the Contacts folder that you want to remove, and then click Remove Address Book.
5. Exit and restart Outlook.

*Works in Outlook 2003 and probably older versions.