Why all the comparisons with Italians, Germans, etc.? They are all the same race: human. ****** sapiens. Vikings, Gauls and Romans? Human. The grey-skinned, horned-or-hornless, Qun-followers-or-not, are a race, and I believe that warrants a name to put them under. A name that is not based on their religion, their culture, or the borders of the land they happen to inhabit. They can be Qunari or Tal'Vasoth, but there still has to be an overarching category to place them in. We have Dalish and city elves, but they are both elves. We have surface dwarves and dwarves who live underground, castless and those with a caste, and yet they are all dwarves. We have Orlesians, Fereldans and Tevinters, but they are all still human.
I don't find the argument of "mutated" Kossith that convincing to dismiss the term as no longer adequate. The elves are an ancient race that lost their longevity and magic has become increasingly rare among them, and yet they are still called elves. The dwarves have build up resistance to lyrium by living so near to it for so long, and yet they are still dwarves.
So, no, I don't think the forced confusion is realistic at all. I feel it's contrived, and the argument that in Thedas, nobody cares and just calls all the horned guys Qunari, completely unbelievable. At the very least, Brother Genitivi is supposed to care.