Hmm... I'm not sure I understood the question... are you asking how to mark all entries with duplicity, instead of leaving always one of them unmarked? If so, then try this:
UPDATE e
SET Dup = Yes
FROM Employees e
JOIN
(SELECT FirstName, LastName, count(EmployeeID)
FROM Employees
GROUP BY FirstName, LastName
HAVING count(EmployeeID) > 1) as dupl
ON e.FirstName = dupl.FirstName AND e.LastName = dupl.LastName
I didn't test the query, so I hope there isn't any blunder in it and it will work :-).
cheers, Vladan