In DNN User settings I have DisplayName set to [FirstName] [LastName], when I look at say the ProfileView.ascx file I see it is using [DNN:PROFILE:DISPLAYNAME].

I went into my profile and changed my firstname from Tony to Anthony and saved it.

My profile still shows Tony Harrison though.

Logged off and back on, no change.
cleared cache, no change.

If you make the change under the DNN User Account does display name change properly? I'll look at the code again, but I'm pretty sure the DNN core handles the Display Name changes when you update a profile.