Yeah, I think the origin of the name owes a lot more to the animal, to signal "hybrid of two different animals that's sexually sterile", and that's how the Sorcerer-Kings thought them as. The insensitivity built from the name is part of the point.
4e also changed this slightly, opening to the idea that Muls can make children (and so can Mules apparently, it's just really rare, rare enough that in Ancient Greece the event was considered an ill omen), which would kind of drastically change how and what Muls are in Dark Sun: if they are sterile, and giving birth to them is so difficult that the pregnancy usually results in the death of the mother as stated in 2e sources, then Muls are basically only the result of evil Sorcerer-King experimentation, of which the Muls themselves share no blame but producing more Muls is an inherently cruel process, and they can only exist as people born captive who hopefully will be able to obtain their freedom later in life; if they can just make babies however, even if with difficulty, then that changes stuff, and you can have things such as a Mul who was born free instead of being made to work for the Sorcerer-Kings.