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I'm a Sony user rather than Nook so I'm not sure of its sorting capabilities. My Sonys will only sort by LN FN if the author display is LN FN. If you're getting a mixture of both on the Nook then perhaps you should choose 2 Nook books - a correct one and an incorrect one - then look at the Edit Metadata window for each in Calibre particularly the author_sort box and see if there is a problem there.
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