In general, I think that OLW is a great idea for those of us in small companies that can't afford their own Sharepoint server.  That said, I've found the reliability to be horrible, especially with Contacts via OLW.

Using the assistant's account/computer, I set up a contacts list on OLW, attached it to her Office 2007, then pasted in 800 contacts.  From her perspective, everything seems ok, other than periodic sync errors, including HTTP 404 and 500 errors seen in Outlook.

From my perspective, this works horribly.  I've tried doing this about a dozen times (literally).  Half the time I can't even view the contact list via the OLW website.  I get "Connection to the server is temporarily unavailable".  Using the firebug plugin for firefox, I see:

http://nfertich.workspace.office.live.com/_Services/GetServices.asmx/GetList

The POST parameters are: {"workspaceId":"a3322692-e45d-4b4b-8d2d-368eabd89107","listId":"30f6d7c0-0b02-422b-9166-099e6c027b39"}

The response is an HTTP 500 error with the detail of:  {"Message":"There was an error processing the request.","StackTrace":"","ExceptionType":""}   Not very helpful.

If I access the shared list *before* she pasted the records into it, I am able (usually) to view the empty table, and mount it in my own Office 2007.  As soon as the records are pasted into it, I cannot access the Contact list via OLW on the web, and syncing in Outlook is a gamble.  I get more errors than successes.

I also have shared calendars between us without any problems, both directions. Is it just the contact list on OLW that is fubar?

Other errors seen in Outlook 2007 include HTTP 404, 500, and 501.  (Why on earth is she (the contact list owner!) getting 404 and 500 errors???)

I've recreated the list many times, and never came up with anything other than a partial success.  I need this to be stable through testing such that I can then have other employees mount this Sharepoint data in Outlook.  So far, I've wasted a lot of time in testing, and am not even close to being happy enough to roll this out to other employees. 

I'd be glad to work with a tech to provide additional data to come up with a working solution.