IPhone and IOS5.1

I just updated my laptop (and for that matter the iPad2) with IOS5.0.  My iPhone3G has not been updated since last year when I changed my laptop for fear of losing my precious Contacts.  I would like to update my iPhone 3's.ver 4.3.5 to IOS5.0.  Trouble is my iPad is synching contacts from Microsoft Outlook (very old and outdated) and I cannot afford to lose my IPhone's updated contacts when I update to IOS5.0 using my laptop.

Basic troubleshooting from the User's Guide is reset, restart, restore (first from backup then as new).  Has any of this been tried?
Is the device jailbroken?

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