(...despite the fact that it doesn't really have an HD display... yet)
It's not like the iPad isn't essentially a larger version of the iPod Touch anyway, running the same mobile OS as well as being functionally identical (much as their Android counterparts are just larger-screened Android devices), therefore using the name iPod Touch HD would not be unthinkable, and certainly not insulting in any way.
In the past, Apple chose to call their upper-line laptop the MacBook Pro, and their ultra-portable the MacBook Air, instead of coming up with completely different names because they were merely variations upon the already existing [MacBook] theme, just as the iPad's really just a variation upon the iPod Touch theme.
Or, of course, Apple could just pay the possible fines etc. and continue business as usual.