This phone definitely syncs google contacts back and forth, no worries there.
As for apps....I have around 64 on my phone, and I've got something like 88 mg free out of 165 mg. I use a free app called "Titanium Backup" to transfer as many apps as possible to my SD card. Without moving them, (which doesn't affect how they run), I'd only have around 17 mg free.
What he fails to tell you though is he is rooted, which if you dont know what that is or dont plan on doing then you will not have that much memory left! Other wise it is a good phone for a starter to mid range.
Got 2 Optimus S today. Good phone, but my wife home key doesn't work.
Not good.