It's pronounced "oht-nee-EL" in Hebrew, not "aht-ni-EL." The vowel that's usually pronounced "ah" becomes "oh" under certain circumstances (closed, unaccented syllable). That's why the name is written in English with an "O".
Othniel was the brother of Caleb, not his nephew (See Joshua 15:16-17; Judges 1:13). He was also one of the first Judges. I think it's a lovely refreshing name.