http://itunes.apple.com/us/app/groups+/id473156511?ls=1&mt=8 It's free now for 6 days. Contacts group applications, you can use this app to group your contacts, send group emails,sms,etc. Auto-Groups function can auto group your contacts depends on the email addresses. So you can easily send emails/sms to colleagues or all your gmail/hotmail friends. EmailPro can send to multi-groups and you can also add photo attachments. http://itunes.apple.com/us/app/groups/id473156511?mt=8 0.99$, now be free for 3 days Nov.11 - Nov.14
Link is broken but downloading now (edited link in my browser to work). UPDATE: Added a group; however the group did not show up in the list on the front screen? If I click "EmailPro" button and then "Add To" button I can see the group I created but I can find no way to add individual contacts to the group. The only feature that appears to be working is the "Auto-Groups" feature but even it is buggy...'hotmail.com' and 'Hotmail.com' are treated as two separate groups?
Updated to iOS 5 within first couple of days of release so that is not the issue. Running iOS v5.0 on a 32Gb iPhone 4...