You usually normalize a database to avoid data redundancy. It's easy to see in a table full of names that there is plenty of redundancy. If your goal is to create a catalog of the names of every person on the planet (good luck), I can see how normalizing names could be beneficial. But in the context of the average business database is it overkill?
(Of course I know you could take anything to an extreme... say if you normalized down to syllables... or even adjacent character pairs. I can't see a benefit in going that far)
Update:
One possible justification for this is a random name generator. That's all I could come up with off the top of my head.
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