Hmmm ... seems I was a bit tipsy whan I posted above. It's all wrong!
If you enable Messenger Plus! Custom Names, then when MSN Messenger is set to display contacts by email address, Messenger Plus! takes control of the displayed names, in the contact list, but not in toast notifications, or in the user typing messages, as TazDevil noted, and wants done.
Messenger Plus! defaults contact custom names to thier display names if you don't enter one.
I thought I should note that emoticons don't display im names when Messenger Plus displays them, unlike if you just show your contacts names normally. I will edit the above post.
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