You actually should use regular Handlebars.compile
here. The Typeahead library doesn't know anything about Ember bound templates, so it doesn't know how to invoke them.
Alternatively, your template is so simple it could just be a literal function, to save yourself the hassle of shipping a Handlebars compiler in production or precompiling this one specially:
templates: {
suggestion: function(context){ return context.firstName + ' ' + context.lastName; }
}