I have an iPhone 4s (Verizon) which worked fine until after the 5.0.1 update and now have the same problem where my contacts are not displayed with instant messages or phone calls. After the update, contact names were not displaying in either phone calls (e.g. incoming calls, recent calls) or my instant messages. Before the update, I never experienced this problem or anything related to it.
SOLUTION #1 ATTEMPT (*228): I did the *228 (option 1) that people have recommended. That worked so that my telephone calls were matched with my contacts. However, I still could not see contact names with my instant messages.
SOLUTION #2 ATTEMPT (partial reset): I called Verizon and they had me do the power button + home button to reset the phone. For whatever reason, that flip-flopped my issue so that the contact names were now seen for instant messages, but not telephone calls.
SOLUTION #3 ATTEMPT (full reset): The Verizon representative got an iPhone representative on the call and we tried a full reset on the phone (where it nukes your data). This did not help at all (neither messages or phone calls showed a contact name). I had to do a restore.
SOLUTION #4 ATTEMPT (+ country code): I read where if you add a "+" and country code in front of the number in the Contact that this resolves the issue. For one of my contacts I added the + sign followed by the country code. Interesting, this flip-flopped the problem just for that Contact by making the phone calls with just this Contact show the contact name, BUT NOW the messages with this Contact do not show the contact's name (all of the other contacts remained the same). This clearly indicates this is a software problem as there should be no reason for flip-flopping (it happened to me twice).
SOLUTION #5 ATTEMPT (Waiting for iPhone Technician): The iPhone representative has escalated my problem to an iPhone technician who is suppose to call me. If the technician is able to resolve the issue, I will report the same here (but in the meantime, everyone with this problem should report it too Apple immediately!).
If you have this problem, please contact your cell phone company and have them get an iPhone representative so they can get this very serious issue fixed. It is important that everyone with this problem report it to Apple otherwise nothing will be done!
Let's hope Apple addresses this bug in their software! We can then have them focus on the Siri problems. :-)