Why are data extensions in Salesforce Data Extension folder/sub-folder not available to be added in the contact builder data model? Is this a very specific design restriction? To the best of my understanding having data extensions in the Salesforce data extension folder only serves as a directory that can enable tracking to be sent back to Salesforce when sends are made through Email/Automation studio. Why is this folder not available when building contact builder data model? Am I missing something? Thanks!
Salesforce Data Extensions are indeed not available in Contact Builder - only in Email Studio. This is a limitation of the application, you are not missing anything. I normally set up the entire contact model in Data Designer using regular data extensions, and only use the Salesforce Data Extensions for e.g. Guided Sends. Remember, the contact model is mainly utilised in Journey Builder, which always will push tracking back to Sales Cloud, regardless what type of Data Extension is being used as entry event.