Service accounts for SQL Server 2012 only allow pre-Windows 2000 name?
Confusion comes from the fact that user account objects have two names in Active Directory: User Principal Name (UPN) and Security Accounts Manager ID (SAMID). Both of these must be unique in the forest.

The UPN is composed of the user logon name concatenated with an at symbol concatenated with one of the UPN suffixes that are set up in the AD forest. It is the "User logon name" entry in the dialog above. For example administrator@adatum.com.

The SAMID is composed of the NetBIOS name of the domain concatenated with a backslash concatenated with the NetBIOS name of the user account. It is the "User logon name (Pre-Windows 2000)" entry in the dialog above. For example, ADATUM\Administrator.

Many places in Windows accept either name; many do not. For example, logging on to a non-AD machine such as Windows NT4 requires the use of the SAMID. For example, logging on across a forest trust may require the use of the UPN.

The user account name part of the SAMID is also used to generate user folders (local profile, home folder, roaming profile, etc).

As for your problem, the service account should, as far as I know, accept either SAMID or UPN. You do, however, have to specify the full UPN. In other words sqlservice@adatum.com, not just sqlservice. I'll do some testing here once my VMs are started.

OK, after some testing (SQL Server 2008 R2 and SQL Server 2012), it seems that SQL Server Configuration Manager ust doesn't like the UPN. I kept getting a "specified network password is not correct" error. Google found me this StackOverflow issue. As that page states, changing the service account in the Services MMC can use both UPN and SAMID. 

Historically, changing service accounts using a tool other than SQL Server Configuration Manager was bad as it didn't put the new service accounts in the correct groups. Newer versions of SQL Server don't use groups for registry and folder permissions but use virtual accounts instead. Despite that, I think my advice is still to always use Configuration Manager and to use specify service accounts using their SAMID.

As an aside, you may be better off using Managed Service Accounts (if your AD supports it). They remove the need for you to deal with password expiry and SPN registration.