"The only flaw in this stuff is R.E.H.'s incurable tendency to devise names too closely resembling actual names of ancient history -- names which, for us, have a very different set of associations. In many cases he does this designedly- on the theory that familiar names descend from the fabulous realms he describes -- but such a design is invalidated by the fact that we clearly know the etymology of many of the historic terms, hence cannot accept the pedigree he suggests. E. Hoffman Price and I have both argued with Two-Gun on this point, but we make no headway whatsoever. The only thing to do is to accept the nomenclature as he gives it, wink at the weak spots, and be damned thankful that we can get such vivid artificial legendry."That's Lovecraft himself, sui generis creator of an entire mythology, talking in a 1935 letter to my old penpal Donald Wollheim about the work of Robert E Howard (specifically, his invented history of "The Hyborian Age").
I have to agree with HPL. Fantasy novels full of names culled from the author's vague memory of bits of history and myth are the main reason I don't read much fantasy. We can allow Howard to get away with it, as HPL did, because, firstly, he was an exceptional writer and, secondly, he did at least understand the derivation of the names he was using. He would put Aesir in a northern clime, have swarthy barbarian mercenaries waiting for their pay outside the walls of Carthage, and so on. It helped to paint a picture. It was a conscious choice by the writer, it wasn't laziness or ignorance.
But most fantasy writers are not blessed with Bob Howard's vivid imagination or natural storyteller's instincts, and cities called Vishnu in a medieval-ish Western-y setting just come across as witless. Likewise confusing the function and even gender of historical Greek or Roman gods - just make up your own, for Zeus's sake.
Lovecraft was a man who stuck to his guns even more than Two-Gun. Whatever the cost (and it seems to have been huge, in terms of health, finances and happiness) he steered a straight course by the principles of his craft. In his lifetime he enjoyed nothing like Howard's popularity among the readers of Weird Tales, despite the proselytizing efforts of a small and devoted band of followers.
But look, here we are seventy-five years later and the Cthulhu Mythos is one of the great modern IPs. I'm not sure Guillermo del Toro and Mike Mignola would have careers without it. (That's a joke, by the way, but only just.) The reason it has such power is because it is a pure and complete sub-creation, as Tolkien called it. When Lovecraft needed a name for an invented god, he didn't do the easy thing and reach for Bulfinch's.
The lesson, I guess, is that if you want to create great fantasy (and fantasy, when it is done well, can be great indeed) then take the path less travelled. Dig down into your own imagination. Invent places we've never seen outside of dreams and give them names that resonate on a deeper level than just "Kishapur" or "Ragnarberg". You may die a pauper's death, but your existence will have brought to the world something of true and incomparable value: originality.