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I believe this is a strategic mistake, just wanted to post my thoughts.
I started to use Plaxo years ago as a way to back-up and synch my contacts and calendars. Worked pretty well so far, allowed me to move job without loosing my electronic brain -despite some technical glitches (with the Yahoo! and Gmail contacts synch).
You then introduced "social" features and many of my contacts now refuse to update their details because of privacy concerns and also as they don't see the point signing onto another service. The Plaxo Pulse has thus reduced the value of your mainstay service. That's bad.
Now, with making the Outlook synch a paying service, I can see that the user base will shrink massively as people won't synch their address books anymore and see even less point in updating their own details.
While I understand nothing can remain free forever, I believe that you're making a strategic mistake.