Well, honestly, the quality on Pidgin isn't much better than the contacts app in the N900. And you will still delete contacts from the servers if you delete them in Pidgin.

The problem is that people aren't thinking, "this is an IM chat client like Pidgin," they are thinking, "This is a mobile phone with a phone book, just like my other mobile phones," but it isn't, it is much more "connected" than that. If you carry on an e-mail conversation with someone in GMail, suddenly their status will start appearing in your N900's contact list!

I agree with jjx, what is needed here is some more guard rails and seat belts. You need to be able to undo changes that you make to your contacts without much hassle, and you need more confirmation dialogs with more clearly worded warnings.