I've never had problems searching display names...
I've never had to
search a login name, since they're unique, while a display name might have dozens of results.
You just hit "Add a friend" at the bottom of your friends list, put in the Steam ID, and there you go.
If it's a display name, you have to search it, possibly pick out from several users, etc.
sir_awesome
Is it case sensitive?
I don't think so since I added HaloHalo without capitalizing anything.