I have it working in both ways.
iPhone iOS 4.1
Contacts, select All account on my server, added a test account.
WUI
Login, select Address Book, found my test account with my Emailed Contacts??
Deleted this test account.
Once again, iPhone iOS 4.1
Contacts, select Contacts!, added a test account
WUI
Login, select Address Book, Contacts. Yes, there it is.
Let's move on, iMac OS 10.6.4
Open Address Book, select my Zimbra account, there is my test account.
Let's try it the other way around, delete the account on my iMac, check it on my iPhone, no more test account.
Setup:
iPhone, CardDAV account:
Server: my.server.com
Username:
account@my.server.com
Password: **********
SSL port 443