I am myself torn on what I want more: the current, sometimes funny names or more realistic names. On the one hand, it's great when you're dwarven civ is called "The Beards of Drinking"; on the other, mostly the RNG comes up with nonsense, like "The Scintillating Rags," which (I think) is neither funny nor interesting. Having towns named after location or founder - say "Urist's Ford" for a hillock by a river - would be very cool, and would make the world feel more historical.
Names for people would depend more on culture, which as it stands is fairly absent from DF. First name/last name I think should always be present: first names being drawn from a pool of derived terms (a shabby example: "Nòmuvel," from nòm "god" and uvel "bear," equivalent to English Osborn); last names coming from different sources as mentioned above.
In addition to this, family or clan names might come up in civs with more cultural focus on lineage (dwarves and humans come to my mind): either as a third name (like the Roman cognomen) or perhaps prefixed by "Clan" or "House" to make it more explicit. Nòmuvel Eshtân, clan Måmgoz-ugog: "Osborn Smith, clan Dragon-bane."
There's also patronymics as in Russian (or matronymics, if you prefer). Lots of possibilities for names.
In any case, it's not something that requires immediate attention, but could stand to be smoothed out at some point. As I said it depends heavily on culture, which we don't have in any meaningful form, so I'd stay away from making any definite naming-systems for the present.
There is no Dwarven word for magma???
There's no dwarven word for a lot of things. Not for look, see, hear, come, go, give, do, or even be. But we have "scintillating."