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You'll generally find a "My Documents" folder on every type of storage, including formatted memory cards. Your Notes will generally be stored in RAM.
I don't know if there is a max size for Contacts notes but I imagine there is. I would suggest looking into Agenda Fusion or Pocket Informant. They allow files and... waitlist about anything to be "linked". So you could record Notes, or any other kind of file and link it to a Contact.
Chris...
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