I have had some help from others on here so this is an attempt to give something back. You have to get SimPE if you do not already have it. It is a free download. It is also free to use. Before using it I strongly suggest backing up your saved neighborhoods. This can be done by copying the Neighborhood folder located in default directory:
(My Documents\EA Games\The Sims 2). Put it somewhere safe like desktop or another folder you can create and place on desktop. I also backup my downloads folder and Packaged Lots but that part is optional just kinda my style. You also have to have Microsoft .NET framework 1.1 installed. If you are unsure you can go to control panel, click Add/Remove Programs and scroll down and see if it shows up. It should if it is properly installed. It is a free download using Windows Update if you do not have it. I am using Windows XP Home. Now for the fun stuff.
Open SimPE, then click on Plugins and Neighborhood Browser. You will see the neighborhoods listed in a list. Pick the neighborhood where the Sim or Household that you wish to edit is located and chose open. Note that if you already backed up your neighborhoods folder you probably do not need to back it up again. You also have to chose the Plugin View tab about halfway down after SimPE loads the neighborhood. (There will be four tabs: General Overview, Packed File, Uncompressed Data, and Plugin View.) You want to chose Plugin View.
Next, under Filetypes scroll down to find Sim Description, and highlight it. Then click on Plugins and Sim Browser. This should take awhile to load, and may appear to be freezing up but just let it go and try not to do anything while it is loading your sims in the neighborhood. After it is finished a box will appear with all of your sims in the neighborhood. You can sort them by first name by clicking Name, or by Household by clicking Household. Find the Sim that you want to change their last name, or one that is in a household in which you wish to change the household name. Then click open. In the Plugin View you will see a lot about your sim. There are many features you can edit here but I am strictly dealing with last name and household name changes. You will see Name which contains the sims first name in one box, and the last name in the other. Delete the last name and enter the desired one. Directly after doing this click Commit in bottom left hand corner then file and save. Failure to do this may result in changes not taking affect. This will change the last name of the sim, and can be done with other sims as well to get the desired last names. If you want to change household names then all you have to do is look in the area where you could change the sims last name and on the left hand side there should be a Family Instance number. Highlight it with your mouse and right click once and chose copy. Then in the Filetypes selections there should be one called Family Information. Highlight it. At the very top of SimPE there should be two blank boxes. One is called Group Filter and the other Instance Filter. Right click with your mouse once in the blank box for Instance Filter and chose Paste. Then beneath where you pasted the number there should be a section called packed files, in this there should be one file there called family information. Click it once normally. Under the Plugin View it will say FAMi Editor and you will see the Household name under Name. Simply delete it, enter the desired name, click Commit in bottom left hand corner then file and save. You have just successfully changed a household name.
I am using the latest version of SimPE and suggest you do the same. I have University installed. If it doesn't work for you try again and make sure you are clicking Commit and then File and Save after each change. Not doing so can result in this not working. Also make sure you have the latest SimPE version. If anyone else has posted this I am sorry if it feels like I was copying, but I really am not as I was upset about Household names and worked with SimPE all night and figured this out. Credits to anyone else who has and I hope this adds to your Sim Experience!
(thanks for your contribution, eef97