Google Desktop group seems to agree that contacts search will be limited to *Google* contacts, not offline contacts (e.g. Outlook).
Google Desktop Extreme *seems* to offer an alternative but its description includes occupation of a system tray slot - presumably its own continuous indexing - seems like a duplication of effort what with Google Desktop itself already monitoring files!
As an aside, I am, yes, a dialup user, and have disabled any Google Desktop functions that involve periodic (disruptive, to me) online polling.
Anyone found another way to have GD search offline contacts?