I came across a discussion on here in the past few days (I do not remember the exact one, sorry) regarding character names and how ZOS can force one to change these for referencing something uncouth, while zone chat is basically unrestricted and anyone can get away with saying the most horrific things in there without consequence.
As far as the player is concerned, what is the primary difference between offensive comments in zone chat and offensive player/character names? I would say that it is that you can hide zone chat, but you cannot hide player/character names.
So, why not provide this option? Personally, I would usually use it, simply because, even though I use an addon which hides the account name and shows character name only, most character names are not lore-friendly and it would help my immersion to hide them entirely. I'm sure others would have their own reasons for choosing to use it if available.
(I am speaking specifically with regards to the target frame -- I doubt this would be helpful for nameplates, which I have personally never used, so I am not sure their exact functionality, and are already optional.)
@ Yffre'sTrill - PC/EU (No Steam)
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Naering (Bosmer WW Archer - Valenwood separatist, Hircine-agnostic, honoured affiliate of the Gang of Scroungers.)
Alts: Kunali, Free-as-Wind, Gurzog gro-Kosh, Seldril, Hatiba, Kareemal, Gilfirion, Elorwe, Ludvikke, Tsetha-Vos, Loulou Villeau, Nilvani, Horvund, Maritia, and Treads-the-Aurbis.