I don't think that is a bug. Why would you prevent an admin from changing a users name?
Admins have full right to alter anything in Elgg.

Usernames, however are unique. And you cannot change them, even admins can't from what I remember out of my head, unless you'd go directly in de db.

Displaynames, however do not have to be unique in Elgg and of course admin could change them.
That's quite logical, since people just can have the same name as others. If you want to prevent users from using the same displayname, I think you would have to write a mod for that. Or you could just try to get rid of the displayname, which is not so difficult to achieve, that way, no admin can edit a name, and all names have to unique.