Funny names are bound to happen, I myself prefer it when a character earns a funny nickname, but over the years I've seen some amusing things. A few off the top of my head.
Most of these are pre 3.x ed.
An elven fighter/druid who kept 4 war dogs - Crockett, Tubbs, Switek and Zito
An NPC female barbarian who followed a bear totem, encountered while imprisoned and naked. she got the nickname "Bear" or "Bare" (and I'm certain the the players had both meanings in mind)
A human nomadic horseman named Ughle - pronounced Oogle (that character didn't stay long as the player droped from the group, but years later we still blame stuff on our horse master Oogle)
A character suffering amnesia who was named "Emma"(esia).
A halfling fighter named "Bubba" (and played as a red-neck)
A halfling thief named "Dip Fong"
A monk with a vow of silence that the party decided to call "Q the monk"
A halfling fighter/rogue named Zivan Andurst, not funny in and of itself, but once he got his cloak of the bat he became "Half Batman"
One player has a habit of frequently naming characters non fantasy styled names, and has played characters named: Steve, John, Bill and other such common names.
One campaign two players named their characters after PCs of the DM, with the letters reversed, thus, Nipsar (named after Raspin) and Evatco Suissac (named after Cassius Octave)