I've filed this as a feedback report (FB22305448) and wanted to raise it here in case anyone else is seeing the same behaviour or can confirm.
The Share Sheet's suggested-people row appears to ignore the system Contacts name-display settings. When a contact has a Nickname set, that Nickname is shown in the sharing suggestions even when nicknames are explicitly turned off.
Settings state
Under Settings › Contacts › Short Name, both toggles are off:
Short Name — Off
Prefer Nicknames — Off
With these off, the rest of the system (Contacts app, Messages conversation list, Mail, etc.) correctly shows the contact's full/short name rather than the Nickname.
Steps to reproduce
Open a contact and add a Nickname (e.g. contact "John Smith" with Nickname "JJ").
Go to Settings › Contacts › Short Name and ensure both Short Name and Prefer Nicknames are off.
Open Photos, select a photo, and tap Share.
Look at the suggested-people row at the top of the Share Sheet (the iMessage/AirDrop suggestions).
Expected behaviour
With Prefer Nicknames off, the suggestion should display the contact's full name (or short name if Short Name were enabled) — i.e. "John Smith", consistent with every other part of the system.
Actual behaviour
The Share Sheet suggestion shows the Nickname ("JJ") regardless of the Contacts setting. The setting is not honoured in this surface.
Notes
Reproducible every time.
The Nickname is shown only in the Share Sheet suggestions row; other system surfaces respect the setting correctly, which points to the Share Sheet / suggestions component reading the contact's display name without applying the user's nickname preference.
Feedback ID: FB22305448
Has anyone else run into this, or found a workaround short of removing the Nickname from the contact?