Hi Tony LoftusTL,
I go through the post carefully, based on my test I can repro the same error on my side. we may get the error because Contact group could not be a valid item in Contact list in SharePoint, so Outlook cannot sync Contact group to Contact list and we will get the compatibility error. I am really sorry for the inconvenience this causes and would suggest you post in SharePoint feedback community at SharePoint · Community (microsoft.com) and give your feedback on the feature. Your feedback will promote the related developer team of SharePoint to improve the feature! Thanks for your efforts and understanding!
Best Regards,
Clark