I think they take Fame into account. Kings may be automatically known, as well as the ruler of the Settlement you came to life in. That being said you may not get the nameplate for a Duke because even though they are well known you have never met them.

Let's say the King wanted to go for a walk. They could put their hood up and walk through town without their name automatically popping up for everyone to see.

Also, I am not sure about the distance you need to be to see the nameplates pop up.

Let's say a group of thieves put together a large group and ride into a town flying a Duke's banners, well dressed, and act like they own the place. I wouldn't want the nameplates to automatically appear. Would you actually know they are who they say they are? I would rather the game not decide that for me.

To elaborate on what @PhKnight said well, you have to consider what the subjective knowledge and experience of each character is. Without photography, and without accurate and widespread portraiture (perhaps on coins or monuments), there is no way for most people to know what anyone looks like without having seen them in person. A guide to a person's importance could be the panoply with which they are surrounded. But the panoply itself is probably too expensive for most deceivers to display. If a group of thieves were able to afford to dress in the style of a ducal party, they probably wouldn't need to be thieves. (On the other hand, one could argue that nobility are thieves, but on a higher level of operation.)