AIBU to wonder about names in the past.

Complete nonsense.

I deal with families in the past all the time for my job. There are several things going on here.

First, in the past people used a much smaller pool of names and you can read about that here: https://one-name.org/modern-british-surnames/statistics/forenames/mens-names/ - one stand out is that around 1900, 72% of men had a "top 10" name - John, William, George, Thomas etc. So you have a society where there are a LOT of people all called John, Mary, Jane, George, and often with common surnames too. You have to differentiate between them. Many used middle names or nicknames. Nancy for Ann, Peggy/Meg for Margaret, Kate/Kath for Catherine etc. And others just went totally off-piste with nicknames for whatever reason. Part of the reason for this is that certain parts of the country had specific naming traditions - first son named after father's father, second son named after mother's father etc and this kept the pool of names small. Fashion in names wasn't a thing, you did not have many parents naming their children after "celebrities" as that concept didn't exist in the same way. Middle names were not commonly given in ordinary families (i.e nearly all of us) until the middle of the 19th century, before that you were probably just John or Mary.

my partner's grandad is called Mike and they call him teddy.

Pretty sure that's not true, what's your source for that?

I’ve heard of this happening but my grandparents and great parents all use their actual names. The only thing is our surname was anglicised thanks to fearing Nazis so that has changed.

Definitely the case in my family tree. I have a Queenie (Sarah), Jimma (Frederick), Pearl (Bette), Alma (Emily), Queen (Rose) and Jack (Edmund).

Lots did use their actual names or an acknowledged diminutive, but we only discovered some of their real names recently despite being very close to them as was my Mum!

Everyone was given fake names in the Second World War for security purposes. Most of them stuck.