Munich/Munchen isn't a great example as one is an English name for the city and the other the German name (e.g. Cardiff / Caerdydd). Maybe Paris is a better example?
As far as I can see there's five separate situations with place names in Wales:
1. Places with totally different names with different etymology (Swansea / Abertawe)
2. Places with names with similar etymology but have diverted in spelling and pronunciations (Cardiff/Caerdydd, Caerfyrddin/Carmarthen)
3. Places with two spellings in an attempt to keep pronunciation the same (Caerphilly/Caerffili, Wrexham/Wrecsam)
4. Places with just the Welsh spelling, but pronounced differently depending on language (Pontnewydd, Porthmadog)
5. Those nice, simple, rare, places where everyone spells and says it pretty much the same (Cwmbran)
I guess we're talking numbers 3 and 4 here? Personally I think the number 3 ones are insane and petty. We should just pick the one that is correct etymology wise (i.e. the original one) and drop the other one, whichever that might be.
Number 4 is harder because it's not a case of picking one spelling on the signs, it's a matter of what name people prefer to use. Whilst I find it absurd that people stick to pronunciations that make no sense in the language of the word itself, nobody can force people to change the pronunciation of their own home so I'll stick to Pontnewydd and most of my neighbours will keep saying 'Pontnewid'