Outlook 2011 sync all of a sudden creates blank contacts

I don't know if this is specific to Mountain Lion or not but i've recently noticed my Outlook and sync slowing down..

Thought i would do some checking.. i have 13 contact categories and in total 8,516 contacts..
Now i know i don't actually have this many contacts in Outlook.. should be around 2,300 to 2,400 in total..

So i deselected all the tick boxes and went through each one.
on the No Category box it says i have 4,764 contacts
They are all blank..

I deleted them and then a message came up saying i had some sync conflicts..
Then all of a sudden they started coming back.

What is the sync process with itunes, outlook and an iphone ???
All i want is for my Outlook contacts to be on my iphone

But from what i gather, the contacts go from outlook, to address book, to itunes, to iphone ???
How does this all work and what do i need to change to have contact details go one way only - outlook -> iphone and that's it ???

This is really annoying as i changed over to Mac for work and it appeared everything is working fine..
Now it's causing my problems..