Target Audience > Not recognizing AD Groups???

Hi, I use SharePoint 2010.

I set up User Profiles,
Synchronization did not show any failures; shows a lot additions and updates.

1. Now when I add a target audience and try to add a rule where user is member of :Sales" then Sales group shows up with 0 members while there are 100's of users in AD under Sales group. If I go ahead and add this then I get this error:

Non-existent Membership group (3611DC50-CDFD-4F06-8132-3A84322D7D1D)

2. Many of the AD groups are not recognized at all.

Event log and ULS logs do not have any relevant errors.

Any clue what might be going wrong? 

Thanks so much folks.