The choice of your SD's baby name has nothing to do with how much she appreciates and values her relationship with you.

You have to understand that there is probably no alternate universe where a skid is able to name their child after a stepparent... naming a child after a bio grandparent is very very common.

So.. perhaps she has picked this name because it is kind of "your" name too.. albeit slightly diff spelling?  she figured it was a way to honor you both a bit.. but honestly can't come outright and stir family drama by putting you front and center. with a grandmother she also loves and probably a mother that would have the vapors if she tried to name a child after you.

And.. while your MIL may have made your life difficult.. it sounds like she was very involved from her GD's perspective.. so, you can see how your SD loves her for it.. grandparents can be disney.. they should be disney.. lol.  it's parent's job to do the hard lifting on the parenting train.  your SD  has her own relationship with her grandmother independent of the one you have with your MIL.. and it can't be a surprise now that she loves her grandmother too?

I would not take this at all personally.. it's not meant to be personal.. she is honoring her grandmother's name.. her bio grandmother.. perhaps with a "family" name to carry it on.. that is not in any way taking away from your relationship.  

Unfortunately.. it may have hurt if you assumed that the name was yours and broadcast it as such.. I would have assumed that if someone named a child after me.. they would ASK me.. so you would have explicitely known.. knowing her MIL's name.. I'm not sure why you would have assumed it was you and not her bio grandma.. it would be more common for a grandparent to be the one they would name a child after.. no matter how good your relatinshp is.

Unless you have reason to otherwise believe your relationship has changed.. I would hope you would move forward with love for her and the baby.. they likely had no intention of you having this misunderstanding.. and being hurt by it.

I think it's a compromise on her part, it's your name but with a letter different. Take it as the compliment it is. After all she could have gone w/ "NotTheCarla" 

congratulations on your newest grandchild on the way.

Yep. The vision from SKIDs is you are truly an object/obstacle infront of dad and many of them do not think of us as family even if we raised them as family. It's really not our fault and we should dial back and pour energy and love elsewhere. If your SD is remotely respectful towards you consider that as good as it gets. 

SD and I have no relationship so I never had any illusion I would play any role in her kids lives, especially when it came to picking names.  That's easy enough and suits me just fine.

On the other hand, what does get me is that she (again) has zero acknowledgement of her father, and that did come to the forefront when naming her brood. My SO is completely left out thanks to BM's life-long parental alienation efforts. 

One child had Unique First Name, Dad's/Paternal Grandpa's Middle Name. Second child had two Unique Names. Most recent child had BM's middle name as first, and Dad's mother's name as middle. (They could have done something to honor/recognize my SO's side of the family with Second child, but chose not to, obviously.)

So there is representation for SD's maternal line/BM, SD's husband's maternal & paternal lines, and absolutely zero for my SO. I know it's disheartening for him but... what can you do? 

The thing that absolutely riled me was the way SD continues to lie/obfuscate to her father. When she told him the last child's name (BM's middle name) it was SO OBVIOUS the kids was named for BM, yet she tells my SO it was just a name she and her DH "liked." 

The name is quite unusual (think "Geraldine") and to say that they just happened to like that name is absolutely ridiculous. I even made a comment that there is NO WAY they randomly picked that name, it's clearly BM's middle name!  

And to show you how delusional my SO can be when confronted with the obvious, he actually defended SD and said baby wasn't named after BM since SD said it wasn't.  I wasn't going to be gaslighted ...I told him he was in denial.  He went off in a huff. 

Now he has a grandchild he gets to call by his ex's middle name for the rest of his life, yet another reminder that BM reigns supreme. 

You were back stabed.  The thing about being a SP is you choose to do for SK.  You have no legal or moral responsibility for SK, No more then the neighbors kid next door.   Out of your kind heart you did it ti give SK a somewhat normal life.   SK just do not understand that it's a honor. For another human to do this.  Let MIL deal with her. 
 disengage from her. And GK. 

Positive spin: you don't have to deal with the strings attached. I could see my SD13 guilting and saying "what do you mean you can't babysit? I named my child after you afterall!"

Stepparenting is all the work and none of the awards. Pretty standard so don't take it personal.