I suppose my observation is primarily about creating a professional image in the classroom, but it also seems to affect teacher/student rapport and the nature of the teacher/student relationship.
Over the years, I've found that individual instructors tend to have very strong preferences about whether or not they would allow students to address them by first name. Some instructors only allow students to address them by their professional title (e.g., Dr. So-and-so) or standard formal address (e.g., Mr. or Mrs. So-and-so).
My last name can be difficult to pronounce for some students, so on the first day of class I tell them that they may address me by my first name (though only a few of them ever do) or by some other combination address, like using Mr. before my first name (which some do). Many of my students will make an effort to learn and use the correct pronunciation of my last name. I tell them that I am okay with any of these forms of address and they should choose the one they are most comfortable with. I also add, with some humor, that any of these is better than just saying, "Hey."
When I go through the class roll on the first day, I also ask students how they would like to be addressed -- by first name, last name, nickname, or some abbreviated form of their first name (e.g., Rich instead of Richard). Most of them are fine with first names, though some older students prefer that I use their last names.
I suppose what I'm getting at here is the idea that names are SO important. But maybe the formality/informality of the address is less important than recognizing the unique individual attached to that name. I always know every name of every student before the first day of class is over and I address each one of them by that name, which sometimes elicits some nervous laughter from the students ("We won't be able to hide or escape from being called on in this class!") or even some applause from them ("I can't believe he already knows us!").
We all want to be recognized. And so much of our identity and self-image is attached to our name (just read Jhumpa Lahiri's The Namesake). Whether you're a student or an instructor, I think you just want some confirmation of that identity in the classroom.
As always, I'm curious to hear from other instructors on this issue.