The Urban Etiquette Handbook -- New York Magazine puts together some advice:
Can you reject a Friendster, Facebook, or MySpace friend request from someone you know?
No. It’s not as though adding someone to your online social network costs anything: The only potential damage is to the perceived quality of your accumulated friends. And if you know someone who judges you based on your Friendster network, then, well, like Mom said, he’s not your real Internet friend anyway.
When can you send a thank-you via e-mail?See the article for more helpful advice on things like when you need to unplug your iPod (when you see somebody you know), which officemates to invite to a wedding (people who can fire you), how do you turn down a playdate for a kid you don't like (compliment the other kid).
A mass e-mail is actually preferable when thanking people who combined to put together a work project or totally rockin’ party, as it emphasizes the communal nature of the achievement and offers the opportunity for public praise. Everything else (e.g., weddings, gifts, anniversaries, job promotions or interviews, etc.) still goes on nice, high-fiber stationery or a store-bought card.