Thats a lot of steps!
I remember doing this with version 1.5.
Anyone with a hero who updated to 2.1 through sprints update have these options on their phone?
Another method if you don't care about syncing contacts with Google or use another program.
Settings
Accounts & Sync
Gmail
uncheck sync contacts
Just tried it and it works. Thanks to OP for figuring out what the heck was doing that!
I only have
Settings
Account & sync
but dont see gmail options.