PLease read the following stickied thread, as it explains everything:
'Contact List Clean-Up' => Currently Not Working! (PLEASE READ)
In short, the feature no longer works as it's being removed from the forthcoming WLM 2011 so the server has stopped sending/receiving the data to populate the feature. The only way to know if a contact has you on their list is if they are able to start a conversation with you (although that isn't 100% foolproof, but you'd have to go to quite some length to do it without having them on your list)