Welcome to Android Central! The SD card is primarily useful for media storage, not app installation. Internal Storage is what limits the number of apps you can install, and I'm guessing your phone has very little available. If it's a 4 GB phone, that means you only have around 1 GB available for app installation, since around 3 GB is taken up by the OS.
You can only move apps to the SD card if the phone supports that function, and even if it does, you can only move a portion of an app, so it may not free up much space. Some apps can't be moved at all. To see if you can move apps, go to
Settings>Apps, select an app, and see if there is a "Move to SD" button. See this guide for more info:
http://forums.androidcentral.com/am...roid-memory-how-deal-low-memory-warnings.html
Where are the phone numbers that are being deleted? Are they actual contacts in your Contacts app? How are you saving contacts--are you saving them to your Google account, or to the local Phone account?