The problem with this system is, that the non important NPC's really stand out from the ones that'll have something to say, and this generally decreases immersion. My idea is that, EVERYONE is unnamed, and given a preset name at the beginning. But, when your character learns of their name, either through introduction to that NPC or by reference, their name then changes from the preset one (such as "Powerful Looking Mage Lord") to their actual name (such as "Divath Fyr"). This means that when walking through a bustling city street you've never been before, everyone around you will seem unfamiliar, and perhaps as they don't know you, will not greet you as you pass them by. However, go to the small village which you saved from a Dragon, and they're all named and will greet you happily as you pass them by. I think this will add a certain immersion to the game that personally, I would enjoy.
What do you think?