iOS 7: Make Messages Stop Using Nicknames
I was wrong in my iOS7 First Impressions article. There is a way to get Messages to use normal names instead of nicknames!. The answer is on the Short Names page in Settings > Mail, Contacts, Calendars [look in the Contacts section] > Short Names.
I saw this setting while reading an iMore article by Allyson Kazmucha on how to change Messages from using first names to using full names for contacts: "Don’t like how iOS 7 only shows first names in the Messages and Mail apps? Here’s how to fix it!". The screenshot she offered or her solution also showed the "Prefer Nicknames" toggle.