I think (technically) you have to put their actual name properly as it is on Facebook, and set the nickname to whatever you want it to show up as on your phone. Though I tried this, and it didn't really work. I don't understand what the nicknames are for. When my father or mother calls me, it doesn't say "mom" or "dad" even though I put in those nicknames for them. It still shows their full names. Wish I knew how to get this working, because I have similar problems with some of my Facebook contacts.

Let me know if you figure anything out.