You're probably using a VERY old mod if that's the case. The drivers' names can be edited through Options > Game. Also, in Options > Misc, there is an option to have the AIs use the player's skin and car setup.
As for the AI themselves, yes, they are rather passive and don't overtake much. AI programming in LFS is rather minimal - All they know how to do is drive and follow the race line, overtake cars that are extremely slow, pit for fuel when needed, and avoid crashing into each other in the pits. Apart from that, they're basically mindless. They don't even respect flags. There's basically nothing you can do about it - LFS is online-focused, so the AI is not really a priority for the devs.