Friend of mine dropped his HTC Desire and since the incident he is seeing loads of app force closes and his Facebook contact info (pics etc.) will not sync with his phone book contacts.

It seems that his dropping it has resulted in a software issue. Can anyone shed any light on what might be the issue?

To me it sounds more of coincidence. Tell him to take out the battery and put it back in. That will 'Force Reset' the Phone. Also, delete any unnecessary apps.

Apparently the battery has been in and out a few times since the drop...

Try uninstalling unnecessary apps. Has he done any recent updates?

No updates as far as I know. He dropped the phone and is now seeing issues.

Backup, factory reset, reinstall.
Backup, upgrade to 2.3, reinstall