Isn't this one of those situations in life where no-one is right?
Of course, M and H shouldn't have used a highly personal nickname for their child (although I can imagine them thinking it would be a lovely surprise compliment to the grandmother - without thinking it through).
And on the other hand, the Queen may have owned a lot but it's only a name.
The fact that it was such (supposedly) a huge thing shows how bad communication and/or feelings were between them.
I reckon it shows that the Queen was sick of them by then. Or that the Queen wasn't a loveable old lady, but a bit of a pain in arse herself. We will never know. Why it drives certain people mad.