T-SQL (SS2K8) :: Increment String By Appending 01

I am having a

Source Table: #test1(studID, FIrstNAme,LasteName)

Target Table: #Test2(StudID, UserName)

Now I want to create usernames from #test1 by considering first character of first name and last name and if same combination found then append with 01.

Example if #test1 contains data as below:

1,Abhas, Pawar
2, Arun, Pawar
3, Ashis, Panday

Then i want to create username like:

apawar
apawar01
apanday02

but if same username exists in #test2 then i want to inser records as below:

first apawar will check in #test2, if not exists insert as it is:

if apawar01 exists in #test2 then, cretae apawar02 instead of apawar01

for next create apawar03 and insert and so on...

In brief I want to check created username eith #table2 and if same exists then first check if lower value available if not then create with lower value and insert.