The practice of showing only the name (TEST) in the mail list but the full From header (TEST <test@test.com>) when the message is opened is just normal e-mail client behaviour. The full header is TEST<test@test.com>, because that's what you're setting it to.
To state the obvious, you could just try taking out <test@test.com> and see what happens. I don't think this will work as you're expecting, though, because if I remember rightly PHP will add the default server address if none is supplied, I think it's the sendmail_from option in php.ini), even if you give a name in the From header.
Why would you want to do this anyway? E-mail comes from an e-mail address. Given you can actually specify any fake address you like (at the risk of annoying your users), does it really matter that it has to be a plausible one?
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