Smarty

[U.Tews]

Some general notes about Smarty, not discussing if your general approach is best practice or not.

1. Never run template output thru fetch() in a loop as template output at some point could contain Smarty delimiters resulting in syntax errors like the ones you did experience.

2. If you have variables which contains Smarty tags you could run it through the eval plugin as mentioned before.
See http://www.smarty.net/docs/en/language.function.eval.tpl
But each time {eval} is used it does result in a call of the compiler (same as calling fetch() multiple times.
This will result in bad performance of the solution.

3. Having said the above you should avoid variable containing Smarty tags.
If variables like your {$name} are assigned in your PHP script you should not have a problem to replace {$first} {$last} with real value.
If the string "{$first} {$last}" is generated by a plugin you could same thing because you can get the current values of $first and $last within the plugin as follow:

[AnrDaemon]