This problem is caused by syncing Contacts with the Facebook Online Directory, which is different to the Facebook app.The Directory pulls down profile pictures and info for all facebook friends, even those not in your phone contacts.
You'll get Force Close errors when your phone storage nears it's limit while facebook data is being added. Unless you can clear the Contacts Storage data before that happens, the only solution is system reset.
To clear Contacts Storage: Menu > Settings > Applications > Manage Applications > All > Contacts Storage > Clear data
NOTE: Clearing the data will remove ALL contacts from your phone, including those you entered before syncing with Facebook, so make sure you have them backed up on SD card or linked to a Google email account.