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Contacts on iPhone4 reverted back to 2 years ago

I have an iPhone4 that I have had since they first came out in February of 2010.  I just got my daughter an iPhone4 yesterday for Christmas.  She was so excited that she started going through the activation process on the phone before I had a chance to get her set up on her own iTunes account.  Once the phone itself had gone through the activation I did get her set up on her own iTunes account, however afterwards I noticed that all of our iMessages were going to both of our phones.  If she sent an iMessage I could view it on my phone and when the other person replied the replies would come back to both of our phones.  Our contacts were also merged together.  I finally figured out that her iPhone was connected to my iCloud account.  I made a new iCloud account for her and went through her phone to make sure everything on her phone was connected through her accounts. 

After I did that I noticed that a lot of my contacts were missing and people that I had deleted as contacts a long time ago were back in my phone.  Most of these that I can tell are the way that my contacts were set up almost two years ago.  I had just done a backup on my phone on 12/8/2012 and I have restored to backup three different times.  Each time, after the backup my contacts are back just like they should be, however the circular "loading" or moving icon is at the top and once it quits the contacts revert back to how they were two years ago.  I have also lost all of my pictures from Christmas but I believe this is because I ran that backup.  Any ideas on why right after the backup my contacts are there and then they disappear again?  Is there a way to get them back other then the iTunes backup because that is not working.  Any help would be greatly appreciated.

*As an update to this, I just found out today that when I try to create a new text msg when I start typing the name of someone that is no longer showing up in my contacts, they will show up in the drop down box.  I tried to text my daughter, who got a new phone number with her iphone so I had deleted her old number in my contacts and added her new one.. when I typed her name to text her both her old and new number showed up to choose from however I checked again and only her new number is loaded in her contact.  I tried it with the names of people that are not showing up in my contacts at all and it still will bring up their name and number also. 

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