Actually, a friend and I did a long search for the meaning of this name and here's what we got:
Lorelei comes from Loreley, a rock in the Rhine where the German myth was to have taken place. Translating a German site on the rock and the naming of the rock told us that "lur(e)" means "lurk, ambush" and "lei/ley/leia" simply means "rock". So, as this site lists, Lorelei means "ambush rock".
That's the earliest definition I could find. I'm not sure when the myth came about, but I'm assuming it was after the rock had established the name.
Myself... I would still use it. The name Dolores, for example, means "pains" in Spanish (from the latin "dolor" (pain)), but it was a very popular name in the 1930's. It seems that only certain names retain the tarnish of a bad meaning.
And, like you pointed out, most people don't know their mythology anyway. More people will probable know the song Lorelei by Styx, than will know the Germanic myth.