When it comes down to bulk mail vs. contacts for existing installations, nothing would change. Bulk Mail goes out to group members only anyway, so replacing it with contacts would do no harm (you would just use contacts to send the message to the group, along with the mail tracking and the ability to attach files to it. Also you would get more variables that are auto replaced to include in your mail. And did I mention mail templates?).
Once you store additional data in contacts (apart from the mandatory first name, last name and email), you would be able to make more customized emails, though before that would be a good time to think about the permission for attributes a little bit more (I mean it works and I have a pretty good idea how to solve this elegantly if you have one contacts instance but multiple communities), but still, it needs some talk.
As for the amount of work involved in actually moving from e.g. photobook to contacts, that will differ from client to client. Steps involved:
a) Create the attributes which are needed per default for a person and an organization
b) For each community add the additional attributes (all using the contacts admin page).
b1) If you have attributes which are only readable for a certain group of people, add a group for these attributes. This is a little bit hard to understand, but is part of the setup process which can begin once the initial data collection has been analysed.
c) Export your existing data in CSV.
d) Use the newly (to be released) general import functionality that allows you to match the Headers in the CSV to the attributes in the groups (see a) and b))
As you described your existing customers, they are using different approaches which should probably not be adopted nowadays by new .LRN users.
The benefit of contacts is not the storage in AMS (though this is a plus). What is best about it is the good combination of AMS lists (a list of attributes bundled together) with linking it to groups and permissions, giving you greater flexibility (and reuse ability). Apart from the CRM functionality you get on top.
