I have created the report and I can't see how this then can be imported into the Target lists? Can you go through that in more detail please.
From what you explained, the bit i don't understand is:
"After you create your report based on the Contacts module, go to your Sugar Target list and scroll to the Contacts and click the action button on the right and you can select your report you just created and add those people to the list"
When I go to the target list module, there isn't a list of contacts, only a list of target lists. - unless there is something i'm missing here?