Considering the fact that as a teenager I learned Spanish pretty fluently and have had an abiding interest in Latin languages ever since, it's a little bit odd, if you think about it, that I never thought of using Latin names for fantasy. I don't mean actual, honest-to-goodness Latin; I mean the various descendents of vulgar Latin; i.e., the Romance languages of today.
It took barsoomcore to show me the light; when I first read about his homebrew Barsoom setting (no relation to Edgar Rice Burroughs' world of the same name; except some vague similarities in tone and ecology). And he had a nation that used Spanish sounding names. barsoomcore's Barsoom was already a big "click" for me; which is unsurprising seeing how similar it was in many ways to ideas I had at the time I first read about it, but this idea of using Spanish names, simple as it may have been, was something that had never occured to me and seemed like a great idea.
As I've poked around a bit, I've actually decided to make it a little—but not much—more exotic than that. Rather than using actual Spanish, I've been combing through namelists and dictionaries of Galician, Catalan, Provençal (or Occitan) and Romanian, with occasional Italian as well, and going with that. Other times, I simply take Spanish words and names and subtly alter them manually so that they feel familiar—but not too familiar. One wants to give the impression that ones setting is more exotic than southern California, at least.
This goes back to my theory—which is really the point I was trying to make—that too exotic isn't exactly helpful. I was recently reading a Lin Carter book on the fantasy genre, which I thought was turgid and spectacularly non-academic, despite it's claims to the contrary. Carter himself is no huge name junkie (I still wince at his princess Darloona in his own Barsoom ripoff, the Jandar of Callisto books) and he held out a number of Lord Dunsany's worst names as models to be striven for. H. P. Lovecraft also criticized his friend and fellow pulpster Robert E. Howard for using real-like names instead of bizarro combinations of consonants and vowels that can't even be properly pronounced, thinking that it ruined the verissimilitude of the world as a fantasy construct or something.
I think both of them missed the boat there; people in general, when subjected to really difficult or unusual words and names, tend to gloss over them, forget them and mix them up. There's a time in fantasy when you want to wow your audience with how exotic and fantastic your setting is, and the names is not that time. You want names that are easy for the audience to latch onto, that are familiar (but not too familiar) enough that they can relate to them.
Which is why I've decided that I really like using these slightly off-kilter and unfamiliar Romance languages like Provençal, Catalan, etc. as a source. They sound close enough to Spanish or Italian that nobody gets lost in the names, yet exotic enough that they don't sound like they're actually Spanish or Italian names.