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I would love to know the answer to that question as well...how could google create and email app on their own phone and it not have soooo many features that their standard emailing has...such as copy & paste too.
Having to enter multiple contacts one at a time in the "Address" box is ridiculous.
I had the same problem, the Groups I entered in Google Contacts didn't show up as such on the Droid. An app called Clix fixed that. I think it's $0.99 but well worth it.
I tried a free one but it duplicated many of my contacts and didn't work as well.

I think most people realize this, but the issue with groups is that you cannot email that group like you can in gmail, nor can you sort by groups when you are looking for contact.Well it's not obvious, but the Google Contacts DO get transferred over. Go into Contacts->Display Options. The click on your gmail account (under "Choose contacts to display"). When you do that it expands to show all of your groups and you can select which one(s) you want to display.
I think most people realize this, but the issue with groups is that you cannot email that group like you can in gmail, nor can you sort by groups when you are looking for contact.