If you have used iChat, you know that if you add a user to your address book with the same AIM account as one of your buddies, then you must quit/relaunch iChat in order to show the new name.
The proper way to change the name is to either ctrl-click (right click) on the buddy in your list and choose Get Info, or select the buddy and choose “Get Info” from the Buddies menu.
Then in the newly opened info panel, choose “Address Card” from the Show popup menu.
If you already have an address card for this person, click “Choose Address Card” to show a list of cards. It looks like a bug in that the “Choose” button on the sheet never is enabled, but you can double click on an entry to assign it.
You can also override the buddie’s picture, so it will always use the picture you drop into your address book for that user.