Eureka! At least for Android users.
Looks like its all about the Bluetooth rSAP (remote SIM access protocol) implementation on your mobile phone (and which apparently can vary from one Android firmware level to the next). The default on my HTC Desire S was fine at syncing contacts names and numbers - but didnt sync contact pictures. Also I ended up with multiple entries on the phone for the same person (one for home, one for mobile etc).
The fix is to install the 'bluetooth phonebook' app from
http://www.android-rsap.com/bluetooth-phonebook.html which replaces the default Bluetooth rSAP implementation. Cost £1.79 from Google Play. You will need to check your phone compatibility.
Worked like a dream for me. Consolidated the contacts so now only one entry per person (with multiple numbers). And contact pictures. You will need to recreate your 'favourites' to get their pictures up on the front screen.
Enjoy!