You're gonna either love or hate this...
1. From your contact list in SharePoint, select the "Link to Outlook" tab button
2. In Outlook, accept the dialog boxes and create a new folder of contact items. Mine was automatically named "Team Web Site - Contacts"
3. Select In-box
4. Create a new Distribution List
5. Click "Select Members" button
6. Select the "Show Names from the" drop down list and highlight your new Team Web Site Contacts list
7. Build your Distribution List as normal
8. Name it and save it!
It's actually quite simple once you've done it a few times.