The DL "Name" field reflects the "Display As" field of the added contacts.
If you specify the Display As fields the way you want (i.e., "Last, First"),
then the Name field in the DL will be alphabetized by last name.  You can
resort either ascending or descending by clicking the Name column header.

When you are in the process of choosing the names to add to the DL, however,
the Address Book display reflects the contents of the "Subject" contact
field and that field gets generated from the First, Middle, and Last fields
of the full name.  You can change the Subject field by selecting the "All
Fields" tab of the contact record, selecting "All Contact Fields" fro the
drop-down, then editing the Subject field.  Be aware, though, that the
Subject field gets regenerated when certain changes are made to the contact
record, so its likely you won't be able to retain the value you choose.