Merge tags showing up literally as {{first_name}} in sent emails

This means the contact record being used doesn't actually have a value in that field — when a merge tag has nothing to substitute, it falls back to showing the raw tag rather than blank space (blank space is usually worse and harder to notice). Check that the contacts you're testing with actually have a First Name populated, and for real sends, consider setting a fallback value in the merge tag itself so it gracefully falls back to something like “there” instead of showing the tag when the field is empty.