Where does FYI pick up the Contact Name/Salutation/Addressee from when creating letters?

FYI picks up Client's Contact Name/Salutation/Entity ultimately from Xero Practice Manager.

You can add this from the Primary Contact.

1. Open the client's name in Xero Practice Manager.

2. Under Details Tab, click the + Add Contact link on the right panel and Add the Client's name

3. Click + Add Salutation and Addressee

4. Enter the Addressee's name and click Save.

 5. Manually sync Xero Practice Manager Clients and FYI. Refer to Xero Practice Manager (Synchronising Clients, Staff, Jobs and Tax Returns)

Another way to add it is through adding a Custom Field in Xero Practice Manager called "Salutation" and then use the word merge field layout for custom fields. Refer to Creating Templates with Merge Fields