Creating a variable with the name <hi>Some text</hi> should render as <hi>Some text</hi>
Creating a variable with the name <hi>Some text</hi> renders as Some text
Go to the "Data" category, click "Create Variable", then type <hi>Some text</hi> and click "OK"
Windows 10, Chrome 60.0.3112.113
This also allows variables with (seemingly) identical names:

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V

I'll work on this bug. After a bit of research, the issue seems to actually lie in the scratch-blocks repo.
So, the part about the block names in the palette was in scratch-blocks, and fixing it on stage monitors was in scratch-vm. Just submitted PR LLK/scratch-vm#701 to fix it there.
I recommend closing this after those two are resolved.
Apparently fixed:
Upstream merge solved this! Thanks for the patience.
@towerofnix Well, one of the two parts was fixed.
Second PR has been merged; this issue can be closed.
Resolved in https://github.com/LLK/scratch-vm/pull/701
Most helpful comment
I'll work on this bug. After a bit of research, the issue seems to actually lie in the scratch-blocks repo.