declare @table table (ID int, Name varchar(100))
insert @table select 1,null 
insert @table select 2,null
insert @table select 3,'Bill'
insert @table select 4,null
insert @table select 5,null
insert @table select 6,null
insert @table select 7,null
insert @table select 8,null
insert @table select 9,'Ted'
insert @table select 10,null
insert @table select 11,null
insert @table select 12,null


UPDATE u
SET u.Name = n.Name
FROM  @table u
CROSS APPLY(SELECT TOP 1 t.Name FROM @table t 
            WHERE t.Name IS NOT NULL 
               AND (   t.ID - u.ID  between 1 AND 2
                    OR u.ID - t.ID  between 1 AND 3)) n
WHERE u.Name IS NULL                    

SELECT * FROM @table