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Problem with contacts in MS Office Outlook 2007 after upgrade

I upgraded from my old computer running XP Pro SP2 to Windows 7 with MS Office Outlook 2007 using Windows Easy Transfer. Now my contacts will not work with my emails. When I select a new email and then use TO: to find a contact, I have no addressbook and get the following error: "The search cannot be completed. You must have an address list to search in. If you don't have an address list then conact your Microsoft Exchange Adm."

I have selected Contacts: and then looked at the properties of a contact folder to see if the addressbook is attached to email and the selection is dimmed. I have not been able to attach my contacts folder to my emails, can you help?

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