I don't disagree that some renaming of cities according to who owns it is a bad idea, but an implementation had to be more advanced than what you initially suggested. And as Civilization as a game pans out in a relative short timeframe, renaming cities often may be confusing. But as an option is surely welcoming. How to name, would be controversial however.
Malacca city states is not what today is called Penang. Penang is of course the island by the same name and also the state. Malacca is further south, even south of Kuala Lumpur. Penang is however a good example as early under the British it was known as Prince of Wales Island (named after royalty).
Manila is officially Maynila in local language, it is also Manila in Spanish. But it is an illustration of which you see everywhere that the influence of English or other dominating colonial languages is stronger than the use of the local language. The name of the entire archipelago is also interestingly as it is named after Spanish royalty, even tough there existed names prior to the Spanish.
Londonderry and Derry are both English names, the original name was Daire, and which of the prior to be used are disputed as you say.
Jakarta. Wheter you write it with or without D is more a matter of transliteration, in written "Bahasa Indonesia" the orthography are more phonetic, like it is in like German, as discussed is a problem with English. But Jakarta has had several names, originally Sunda Kelapa, and kept this name even after the first Dutch arrived, however the locals and the Dutch was beaten by a rival Javanese people who renamed it Jayakarta of which the modern name is derived. When they again where ousted by the Dutch, it was renamed as you say Batavia. Indonesia is also a new colonial name derived from greek "Indian Islands" (it was the British who come up with it, not the greeks however who had no interest as they were under Ottoman rule at that time). The dutch called it Indie de Oost.
Normandy have had several different names prior to be called Normandy, which are derived from Romanz/Langues D'oil (Old French) meaning men from north (Normant from norse).
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