California's name comes from fan-fiction:
California is named after the island of California, home of Queen Calafia, her beautiful black amazons and their man-eating griffins, as all detailed in Garcia Ordonez de Montalvo's Las Sergas de Esplandian, which was the Sword of Shanarra of its day, a highly unauthorized but popular sequel to the much more highly respected Amadis de Gaul, more The Lord of the Rings of its day. At the end of Don Quixote, Cervantes had this to say about Esplandian: "Verily the father's goodness shall not excuse the want of it in the son. Here, good mistress housekeeper, open that window and throw it into the yard. Let it serve as a foundation to that pile which we are to set a-blazing presently."
That being said, Las Sergas de Esplandian was the pulp novel the conquistadores had on board when they sailed around and encountered the Baja peninsula. What's more, when the Portola party went up the coast, thinking the descriptions in LSdE were based on actual travelers' tales, they thought the California condors were Queen Calafia's big black man-eating griffins.
And so on to the present day where California is ruled by Conan the Barbarian.
Update: Ape Lad points out that Idaho got its name as the result of a hoax: "When a name was being selected for new territory, eccentric lobbyist George M. Willing suggested 'Idaho,' which he claimed was a Native American term meaning 'gem of the mountains'. It was later revealed Willing had made up the name himself, and the original Idaho territory was re-named Colorado because of it. Eventually the controversy was forgotten, and modern-day Idaho was given the made-up name when the Idaho Territory was formally created in 1863."
Update 2: Andrew sez, "The author of the quoted blurb is off in the placement of their Don Quixote quote. It's not from the end of Don Quixote, but rather from Volume I, Chapter VI, when the curate and barber go through Don Quixote's library and dispose of books they deem improper (or, rather, that Cervantes deems worthy of mockery) -- which means it's near the very beginning of Don Quixote, rather than the end."