The <$chaptertitlename> building block wasn't really designed for what you're trying to use it for. It's for hierarchical books where you're using folders and templates.
From the Help:
Associate a template with a folder
Associate a template with a folder to publish a cover page for the files in the folder. Any template associated with a folder is published like any other file in a book. Use the <$chaptertitlename> variable to include the folder name in the template associated with the folder. You can use this variable for a folder occurring at any level in a book.
As Error suggests, use a running header/footer variable to reference the paragraph text of the chapter title tag.