"My Contacts is a place to import, store and view all of the contact information that's important to you. You can also create your own groups of contacts to easily email many people at once. We add people you've emailed to Suggested Contacts. You can move contacts from Suggested Contacts into My Contacts at any time."
There's an option to automatically move suggested contacts into My Contacts if you frequently email them, but the previous behavior doesn't seem to be an option.
I think this feature should have been encorporated much before, prefarably in the Beta stage. But still better late then never!
You can access the updated Gmail contacts here.
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