DFM is the only application in LMS which does not respect the DCR display name. In order to get DFM to show hostnames, the device has to have a very specific one-to-one mapping for hostname to IP and vice versa. Try usinf the resolver.pl tool to verify your DNS is properly configured:
NMSROOT/bin/perl NMSROOT/bin/resolver.pl IP
NMSROOT/bin/perl NMSROOT/bin/resolver.pl HOSTNAME
If you do not get the proper hostname back for the IP, add an entry for the device in the server's local hosts file and try again. When resolver.pl shows you the correct results, you can delete the device from DFM, then re-add it, and you should see the hostname.