Problem solved (for now at least). This is what I did:
1) Removed my computer from the list in the Account tab.
2) Restarted Firefox
3) Added computer again
4) Waited a while, then removed computer again
5) Rebooted computer
6) Added computer again
7) This time after adding the computer, a new popup came up and asked once 
again for access to the gnome keychain (or similar) to have access to passwords 
or whatever that is. 
8) Checked Ubuntu One web page and indeed contacts are now updated.

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Ubuntu One doesn't sync contacts and file sync is shady
https://bugs.launchpad.net/bugs/474093
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