I've also heard of some situations in US states wherein limitations are basically a by-product of character set choices, preventing the registration of diacritics.
Anyway, the law is pretty arbitrarily applied, which I think is a problem. My parents wanted to give me the norse middle name 'hin frodi' ('the wise'), but the 'hin' was rejected as it could possibly be associated with 'hin håle', an old Swedish name for Satan, which they perceived could cause bullying in school.
For example, on one hand if you only allow normal names then you wind up hampering or completely stopping name progression/evolution/adoption. Historically names have fallen in and out of popularity every few years going as far back as records date.
Another troubling consequence of having a certain group of people signing off on names, is that those people have inherent (even unintended) biases. So for example if someone moves to Sweden and wants to use a family name from abroad that could be rejected for being too unusual even if it may be completely unusual where they're from.
On the other hand is it really in the child's best interests to be named e.g. "Hitler," "AAAAAAA," "Bobby tables," "Stupid," etc? I think if you asked people in the street they would say no most of the time.
It really is a complex issue with no right answer. I will say except in extreme cases I'd side more with the freedom for parents to choose rather than some draconian list. I think new and original names are healthy, even if not well received initially.
Hell, it's not even a unique identifier.
When I'm on the net, I decide to use another name than the one my parents gave me.
I can change my Internet name at will, with the only downside of not being easily identified by those who already know me.
The same should be true in 'real life'. Let the parents give the name they want, but let the child change it at will.
I appreciate this approach because it does give a bit more of an option to the child. I haven't asked, but I expect the parents would be okay with the child changing their name totally as well.