What do you mean deal with taken names? Are you saying you want a system where more than one person can use the same name for their characters?
I don’t think that is possible right now (to be fair, nothing is possible right now). Currently, the only known restrictions are that the a name can’t be offensive, it can’t contain a space and it can’t contain numbers.
Those restrictions still allow a huge variety of names for characters.
It could also be naturally handled with surnames I suppose. Once a character has a surname, that frees up the name to be used again. Assuming only names that look more natural get surnames, it wouldn’t be too weird to have more than one running around, and it would keep the number of them to a minimum because there would only be one player with that name without a surname at a time.
That’s true. Although surnames will only become available at the current max level of 20 so some people might not be comfortable with waiting around for their “preferred” name to be freed up.
Because you’re not a real person unless you’re level 20! 
Is there/will there be any sort of way to get a name and surname pre-approved before hitting lvl 20? While I don’t expect any issues (due to the mentioned leniency), I would be pretty bummed to find out my planned name isn’t accepted after going through the trouble to max a character out.
Seeing that “Damage” is an acceptable name, is it safe to assume most nouns will be fine?
I don’t really want to spend a whole lot of time pre-approving names…but yeah any noun would generally be fine I would think as long as it doesn’t violate the other parts of the policy (e.g. offensive, famous person’s name, etc.) Again, the policy is really about names that look like screennames. People name their kids “Blanket” and “Blue” in real life, so I’m not going to say a noun isn’t a real person’s name 
Just saw this. Surnames are going to be awesome! It reminds me of things that I’ve seen where it’s essentially a ‘family’ of adventurers. This could be a nice alternative to guilds!
It may be possible to use the same surname and form a “family” of adventurers, but that will probably be purely for role-playing purposes. Orbus already has, or will have, an “alternative” to guilds which is called “Fellowships”.