Brand new SP 2010 install patched up to August 2011 CU. When we edit the navigation tab menu entries, We can't set an audience. If I search for Owners we get no exact match was found. If I use the address book it finds it, but never resolves it or other sharePoint groups after selecting them. What is up with this? We were able to import some 18,000+ user profiles.
I take it you use security groups for your audience (memberOf)?
If so, you need to import those security groups as well in your user profile synchronization connection, as the sync both handles users and SG (for audiences).