[DLCPhoto]

I researched this as well when I bought my TP2, and had to switch from Windows Mail to Outlook 2007. I wasn't able to find a way to do what you're wanting to do, as I wanted to do the exact same thing.

I ended up creating a couple of other Contact Folders for ones I didn't need/want on my phone, and this works fine, as you suggest in your post.

I'll be happy to stand corrected if somebody is aware of a way to do this using just Categories.