There should be a way to rename leaders/citizens.  There should also be a file we could replace for custom civs with a selection of names to be used with our custom Leaders/citizens.

BTW is this happening in the official 2.1 update?

Yes on both. It appears to just be using the image file name as the leader name.

Thanks for the advance heads up.  Anything you do to make Custom Civs more realistic is a big plus.  Please think about having someone work on adding features in my Reply #2. 

You have to start a new game, but this did work.  I still got one of those background only pics.  None of my Citizen pics have that background so I don't know where it's coming from.

Just to be clear for anyone else trying to use this fix until the game is updated, you need to do a little more than just placing the file in the English folder.

Location: C: (or what ever drive you have Steam pointed to - mine is G:) //Program Files(x86)/Steam/Steam Apps/Common/Galactic Civ IV/Data/English/Text

Delete or rename the current UnitNames Text file

copy and paste the new unzipped UnitNames Text file 

I wish I could figure out how to add names for my custom civ to the UnitNames Text file.  I tried adding a Faction by copying the Krynn format, but that didn't work.