Using ARS 7 through the web interface, users are unable to search for contacts when adding objects to a distribution list. Users can find the contact in the global search, click the contact's "member of" and add the group that way but when adding a contact to a distribution list directly it will only display user objects.
Since users are able to view contacts, read information and add the group to the contact's member of field. It doesn't appear to be a permissions issue.
