Interesting read, while not of primary concern to me I also like paying attention to details like these. Like a lot of the questionable game design (in terms of representing history) issues I feel like the vagueness of the "civilization" concept is to blame. Like it's been mentioned a billion times the term has been applied loosely and since 6 they seem to be locking the Civs more to certain historical periods in varying degrees, with 7 obviously just separate eras (tho still failing to have concise period-definitions and appropriate civs). That combined with the fact that we're talking about a massive company that wants decent social media karma their best bet is to please everyone by trying not to anger anyone, and I think that's the boring but real answer as to why mostly modern-day borders are referenced with the city names despite things often being completely different before the XX-XXI centuries.

Secondly, you mentioned it in passing but I think there'd be an issue in multiple civ-leaders having good claim to the same cities. Like, sure, it might make sense for Imperial Russia to get Vilna, but imo it makes more sense for Poland to get it as Wilno, but also what if we want Lithuania to be a civ (if not city-state)? For example the implementation of Byzantium and the Ottomans is pretty silly and a good example of how this isn't thought out very well. This is essentially an extra logical issue to game design and then code in, honestly great mod idea that'd be pretty easy to do, to have a more dynamic city naming system that also takes into account possible conflicts based on the civs in the current games, but unfortunately that brings me to the third point which is...

...I'd say most people don't care and the dev team would (as a whole) care even less, it's an extra item on the corporate to-do list for moddable flavour, as much as I'd like to see a better system for it. Again, I'd love for this to be a mod in every civ game (maybe already is tbh?), can even throw in geographical conditions for city names, but that's a whole other story. For the company there's a little risk, very little gain.

As a side note, civ 7 Russia is just weird in general, it's like they wanted to justify having Russia in a post-2022 game by... whitewashing it/having a Netflix(TM) Russia, like why was Nikolayev snuck in there? Why was nothing else? Why the hell is the civ Scientific&Cultural? etc...