Apparently, the term *renormalization* has been coined by several people in the 40's, as you can read on a [CERN Courier from August, 2001][1] for instance. Below a quote of the relevant part: 

> The puzzle [*how to tackle the infinities appearing on loop diagrams ?*] was resolved in the late 1940s, mainly by Bethe, Feynman, Schwinger and Dyson. These famous theoreticians were able to show that all infinite contributions can be grouped into a few mathematical combinations, $Z_{i}$ (in QED, $i = 1,2$), that correspond to a change of normalization of quantum fields, ultimately resulting in a redefinition ("renormalization") of masses and coupling constants. Physically, this effect is a close analogue of a classical "dressing process" for a particle interacting with a surrounding medium.

but there is no reference to the original works. I'll try to find them out to see why they used this word instead of *redefinition*, *dressing* or something else. But it sounds difficult for me since I'm not studying the high-energy sector of the field-theory. By the way, it sounds like a *why-not?* definition.

More interesting is your second question, about a better name. This one already exists actually, and it is sometimes used: it's *scaling invariance*, *scaling laws*, or *scaling* something... This is cristal clear in the concept of [renormalization group][2], from Wikipedia for instance, including all the historical relevant references, as for the CERN Courier cited above. For some reason the inventors of the renormalization group approach kept the name *renormalization*, but *(re)scaling* is definitely a better choice, as you *rescale* your theory actually (time-space length, mass, interaction constant, energy, ...)


  [1]: http://cerncourier.com/cws/article/cern/28487
  [2]: http://en.wikipedia.org/wiki/Renormalization_group