Looks like I may stand corrected on this one.

I added a good 50 contacts to the Always Show list late last night. Then I go tonline with my N800 and the contacts did not sync. I deleted the GoogleTalk account in Account Settings (knowing fully well that it would not delete my existing GoogleTalk contacts) and added the account again. This time, a few more contacts showed up (actually, 2), but I have no idea what criteria the built-in Contacts app uses to import the contacts (it certainly does not look like it synced, since all the info related to Phone and Email details were not reflected in Contacts as it was set up in Gmail Contacts)

I will be doing more testing tonight to try to unravel this perplexing behaviour.