Why is the Primary Address Type not saving for New Contacts, but working fine for existing contacts.

We're using the NPSP 3.x  with household account model, so there is an integration with the Address object and it's field Address type.

• Enter a New contact with address and Primary Address type filled in with save and create a new contact record and an address record, but it will not save the value selected in Primary Address type. The field is Address type on the address object and it doesn't save there either. 
• Edit an existing contact and any changes to the Primary Address type sucessfully save and update the linked address record as expected.

I tested with a validation rule on the contact to see if there was a difference between what was visisble in the picklist and the value that gets passed.

1. validation rule on the contact: ISPICKVAL( npe01__Primary_Address_Type__c ,"") - This should only throw an error when nothing is selected.
2. Create new Contact, fill in address fields and select 'Work' in the preferred address type picklist. Error is thrown. Retest with 'Home', 'Vacation Residence', and 'Other'. None save.
3. Open an existing contact with no value in Primary Address Type. Make a trivial edit, but leave the picklist blank. The validation rule throws an error.
4. On the same record, select 'Work' for the Primary Address Type and Save. This time the record saves with no error and both the Contact and the Address object are updated.