How do, or can you hide account contacts on the Galaxy S III?
Same issue here, That particular option was in CYM7.5 on my Dell streak. was a nice addition IMO.

Only thing I can suggest, unless there's some sort of third party app for it, is to install a custom rom such as CYM or any other AOSP ROM, I doubt any of the Customized samsung rom's will give you this.

You will lose all the official Samsung junk with an AOSP rom, but at least it'll be stock ICS rather than the crappy samsung replacement apps.

(I like some of the samsung mods such as palm swipe to screen grab, but the SMS app and Contacts app suck)