If the player wants one, I'm fine with whatever he wants, usually.
One PC in my game had no last name, and after killing an evil druid, he liked the "Thornbane" title that villagers started giving him enough to take it as his last name. (The druids are not pleased about this.)
Another PC got Fistkiller after taking out an evil monk -- but for some reason, his didn't stick.
Also, if you've got a good world background, the PCs progression through different aspects of society should generate new good names. My group is part of a town's guards. The sorcerer is now known as Flamelancer, given his status in the elite arcane guard-group. My fighters are both Captains in the command structure. And so forth. The clerics are Brother or Sister or Guide or Warmaster or whatever, depending on their faith.
A good world gives them lots of room to build a nice name.
-Tacky