I just got my Windows Phone 7 and added my Outlook, Windows Live, and Facebook accounts to the phone.  The phone automatically downloading and merging all my contacts from each source is GREAT! However, I quickly realized that I ended up with 800+ contacts in my People Hub making it a little overwhelming.  Especially since most of the contacts came from Facebook and a number of them are people who I don't regularly interact with or I don't need them to be in my phone's contacts list. 

So if you're like me and want to remove those unwanted Facebook contacts from your Peoples Hub, follow these steps:

  1. Navigate to SETTINGS then swipe right to APPLICATIONS and then choose PEOPLE

  2. Then scroll down until you see a section that says “Include Facebook friends as contacts” and choose the “Only add Facebook info to existing contacts” radio button

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UPDATE FOR WINDOWS PHONE 7.5 (Mango)

This menu has changed slightly.  To remove unwanted Facebook, LinkedIn, Twitter, or even a particular e-mail account's contacts, do the following:

  1. Navigate to SETTINGS then swipe right to APPLICATIONS and then choose PEOPLE
  2. Then press the FILTER MY CONTACT LIST button where you'll see a list of which accounts to show contacts from.