Crx, I've got groups in my N5 contacts. Unless I'm not understanding something right. I opened a contact to edit and scrolled all the way to the bottom and found groups there. If that's not what you were talking about, my bad...
It's what Brosko said... Google removed our ability to filter or search by group, severely ruining the Contacts app. Many of us have been waiting, very impatiently, with every update, hoping it will be corrected.