Installation update does not say to backup contacts. It does tell you to back up pics and music and 3rd party data. I did the update and of course, now all of my contacts are gone. 4 yrs of contacts wiped clean. HTC support will not offer a solution. When I asked why pics and music would specifically be mentioned but not contacts, the reply I received was "sir I don't know, I didn't design the website". Not only have I had constant probs with the device, customer support stinks too.
Not that it helps you particularly now that you have lost the information already, but it may give a little insight into why it works that way.
Most users with Windows Mobile phones are syncing the device with their computer. That sync automatically backs up contacts and calendar to the computer. After doing the update it is natural to resync the device back up to the computer and get the information back. Since you have a full smartphone designed for business use, common sense for business use is to backup the important information and sync it all. So it probably was left out of the information because it is considered common sense nowadays.
The way windows mobile is designed it wipes everything on the device for a ROM update like this. Once that info is gone, it is gone. It does not automatically back anything up, the underlying system is years old before online backup was common place. With MyPhone from Microsoft you can sync wirelessly, that would be my recommendation for the future. All of this information is freely available online with minimal searching. Windows Mobile 7 may do software updates differently, we don't know yet since we haven't really seen it.
Also, the HTC website specifically states "All data will be deleted from the device during the upgrade (music, pictures, 3rd party applications, etc). Be sure to back up all of your data using ActiveSync (Windows Mobile Device Center, if you are running Windows Vista) prior to upgrading. Click here to view detailed instructions on backing up your data using ActiveSync". For most people "all data" would include contacts. It just looks to me that you either didn't read the instructions and are angry that you lost information, even though the instructions say you would if you didn't back it up.
You can also do a manual backup of your contacts very easily on Windows Mobile. Using the File Explorer go to the root drectory (My Device), there should be a file called "pim.vol". That file includes your contacts and calendar. If you simply copy that file over to the storage card it will back it up. To restore it you copy the file back over and replace the old one. It is not automatic, but it is what I teach every windows mobile user I work with to have another backup just in case, even if it is out of date compared to an automatic sync backup.