I know you've probably looked, but did you check to see if Google Apps Sync is syncing to a non-default contacts folder? If it's trying to be "exchange-like" it could be syncing to a global address list. Just grasping at straws here.
Yes, but then you'd need a duplicate removal system and have to constantly be importing/exporting. I'd like it so if I update one, both have it (and then my iPhone has it, since you can trick the iPhone into pulling contacts from Google pretty easily)
It was a long shot, but sometimes there are hidden folders that don't show up in your contacts view. You have to actually open the address book window and click that drop-down box to see them.
Otherwise, it's looking like contacts sync is just in the very early stages and still pretty buggy right now. I'm not sure what else to tell you.