How to seed data with AddOrUpdate with a complex key in EF 4.3
If you got Only primitive types or enumeration types are supported in this context.
because of using navigation property - consider adding foreign key property directly to the entity (maybe only with getter) and use it as Ladislav Mrnka proposed.
Try this:
context.People.AddOrUpdate(p => new { p.FirstName, p.LastName }, people);