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Hi Daniel,
Based on my test, student section in class notebook is named with student's first name and last name from Office 365 admin center. Meanwhile, student sections are sorted from A to Z according to their first name. It's not feasible to change the setting to sort by last name.
We are able to see all students in the class notebook via clicking Add/Remove Students, it is sorted by first name. To get a list for all students sorted by last name, your workaround is a better way at present. Actually you don't have to first distribute pages to students, you could directly click Review Student Work and select a section>select a page>tick the check box of Sort students by last name.
We understand it will be more convenient if teachers can get a student list sorted by last name with a easier method. It is suggested you submit the feedback via Class Notebook Uservoice. This is the best way to let the related team hear your voice.
Thanks for your understanding.
Tim