I don't see the display option on my Incredible, either.
Coincidentally, over the weekend, I noticed that a family member's Droid Eris displays her contact names in lastname, firstname format. I didn't notice the display option on that device, either. I wonder if she has her contacts in that format within the Contacts page on the standard Gmail web site?
For that matter, wouldn't manually updating all of the names on the Contacts page on the standard Gmail web site so that they are in lastname, firstname format -- although being very tedious -- accomplish what we're seeking? If so, this seems less an Android problem and more a Google Contacts problem, doesn't it?