I have a user that wants to have the e-mails in his inbox display as
the name he has assigned to it in his contact list.  For example, if
user@xyz.com sends him an e-mail address, in his inbox view, it
displays user@xyz.com...If he has user@xyz.com setup in his contacts
list as DAD, he wants DAD to display instead of user@xyz.com - he
wants this for all users in his contact list, just not a few, so a
"rule" might be tough.  I can't figure this out!  Help!

As far as I know, the display name in an email is what the person who
sent the email set. You cannot change that, although you can change
the display name to be the same as that in your contact list by
changing it in your address book.

See here:
"Enter your first and last name in Display name. This is the name your
recipients will see when you send them email."
http://resnet.ucsd.edu/body_winoutlook2000.html 

I hope that helps.

Rainbow~