Every potential immigrant to Iceland knows, or should know of their naming policy. Iceland has a culture, a very storied and literate one, which they would like to preserve. They have the right to wish to preserve their cultural identity, forged as it has been over the last thousand years or more.
If such a naming restriction is a make or break thing, potential immigrants are free to go elsewhere. It is NOT a racist policy, but a cultural one. Potential immigrants are NOT discriminated against on the basis of race, but they are asked to conform in this small sense to the host Icelandic culture. Again, they are free to go elsewhere.
When we in the US demand of a devout muslim woman that she remove her veil in order to have her dirver's license picture taken, are we being racist?? No.
Our laws against cannibalism, polygamy, and the serving of dog meat in restaurants go against the historically accepted practices of certain other cultures. Are we being racist?? No.
In Germany, wherever you live, you MUST go and formally register your address with the police. Does this mean that Germany is not a democracy?? (It does not.)
In Great Britian, you are NOT presumed innocent until you are proven guilty. Does this make GB a facist police state?? (It does not.)
Different countries have different mores and socio-political histories. This does not a priori make them wrong, in many cases, such as this one, it just makes them different!
Are there a set of fundamental human rights that do transcend all cultures? The United Nations thinks so, but a careful scan of all 30 articles of their Universal Declaration of Human Rights, codified at their inception in 1948, does not indicate the right to name your son Superman.
It is amazing to me that some of the same people who revile our federal government and loudly trumpet state's rights as the only sure path to freedom and the right to preserve our local ways in the face of jackbooted thugs in our country would so easily impose our collective will on entire other nations, in matters so picayune as the supposed "right" to name your son after an action hero.
Am I glad I live in a country where you can? Well . . . YES (and sometimes no.)
Do I think Iceland is racist because they have a list of names? NO!