What about:
List of Avaible character's name?
-Billy
-Willy
-Dilly
-John Smith
-Mary Jane
Wtf? Total server online 5? Damn, sorry, no more names, try to register later.
Yes, you can't call your faction "****ers" or "Acolytes of *****s" or something like that, but you can name your character so, and, btw everyone will see his name (usually in red color, because adequates never call thier characters so...). So why can't you name your faction as you want? Just put some filters on EXACT bad words, so they can type ***.* or something like that, but who cares, if every player of this faction have almost the same names, and it's not restricted? You can right now register character with really-really bad word and what? GMs will ban you? No... because it'll alreay taken by someone, so you'll need to find other bad word.
Give people freedom in faction names.
Edit:
If people want to call themselves unadequate, then they're so.
Look at Battle.net Warcrafts clans, you can name your clan as you wish, and? You see there stupid silly names? No. Because what idiot want to name his clan so.
Most players will call themselves with normal faction names.