I am biased as a RS teacher, but I do think RS is important for students to teach.
When I first went into teaching 15 years ago, most students knew nothing about Islam. When I left school (to go to a college) a few years ago, I was spending increasing time combatting inaccurate portrayals / stereotypes of religion, particularly Islam.
The ignorance of some students is staggering. Only last year, I had an argument with a committed evangelical Christian student because he would not accept that Catholicism is a form of Christianity. Eventually I asked him what he thought it was and his reply was "a wolf in sheep's clothing".
Increasingly, we see students who think their version of religion is the only way of doing things, and perhaps do not understand that different denominations hold different views within the same religion. This doesn't just apply to Christianity though, but to children of other faiths too.
We do look at atheism too. Again, in my old school we studied Humanism, atheism and agnosticism too (year 8). We also looked at the source of morality - is it from religion or independent of religion? (Year 9) If independent, then is morality relative or objective? This makes up a whole unit at 'A' level.
A lot of time at GCSE is spent looking at ethical issues such as abortion, euthanasia, punishment etc... However, in my experience students usually consider both religious and non religious perspectives and are encouraged to compare the views on a topic from say a Christian, Muslim and Humanist or atheistic perspective.
However, what is actually taught will depend on where you live and the SACRE syllabus that is agreed in your local area. Despite that, I really do think that Religious Studies really has moved on from when we were at school, and it is wrong to judge it by the standards of our own education.
As for the name issue, well in my experience RE is a name mostly used by parents! I've heard it called Religious Studies, Religious Moral Studies, Philosophy and Ethics... depending on what is actually taught.