I'm all for historical accuracy in games and stuff, and I also must say that I consider myself to be a realism freak in most aspects. So here is my assesment on the whole deal.
1: Gloriana is not Earth. We never actually see a map of Gloriana so we don't now its actual geography. We can assume it looks something like Earth (as there are references to many real-life cultures and cameos of real life countries), but again I must say, this is not Earth.
2: I fully agree that having names of REAL rulers and country names is poor form, which is one of the few problems I have with QFG as a whole. Some slightly subtle names, like Surria (replace the 'S' with an 'R' and the 'R's with 'S's and you'll get Russia) seem pretty appropriate. They subtle enough not to cause too many problems with people like me and obvious enough to put a smile on most people's faces.
3: More on part with the 'This is not Earth' arguement. Gloriana has magic, anthropomorphic cat and dog people working as civilized races, and there is little to no apparent racism in the world. While this is great for a decent level of political correctness (as well as creating a good deal of wishful utopian thinking), it just isn't the kind of stuff that's really meant to be taken seriously, plus adding a racial element to QFG would cause a lot of hassle for the game makers, so it was rightfully left out. Also consider that there is no Islam or Christianity in QFG, although they make it clear that they refer to gods of other real life cultures (Egyptian, Greek, etc, etc). It was really silly at times to have this, and I believe that they should have been more creative and better in that department than they have been.
It's just a little rant, I know, but I think I might need to expand on it more later... maybe o nthe offical QFG forums, or over here if it's OK with the Admins.
Till next time stay cool 8)