SIMsalabim is an Android application which allows you to manage the contacts which are stored on the SIM card inside your phone. Google Android itself has so far only minor possibilities to work with SIM contacts, it's just possible to copy the contacts from the SIM card over to the phone contacts and that's it. SIMsalabim adds the missing management functionality to copy the contacts between these two lists and also remove contacts from the SIM card.
Currently the project is in a usable state (and a preview APK package is also available here) but only tested so far on my HTC Magic phone using Android 1.6. Furthermore error handling in extreme situations (like a full SIM card storage) is not yet perfect. But I think it's in a state where it should cause no unexpected effects on your phone.
Nevertheless: use it on your own risk. It still may cause all sorts of bad effects and even harm your contact information. Just to be on the safe side ;)
Some documentation and usage instructions are available in the wiki.