Here's my 2 cents (even though I don't use cents) on this whole matter. Dowolf isn't talking about localisation. He's talking about references. Let's look at it this way. If the GK2 team had decided not to localise the game, then most likely, they would have still kept names like Edgeworth and Gumshoe the same because that's what the fans like. If they bother to find a fan translation, then it means that they care enough to play it. And they know what they're in for. Japan, but with references they recognise. Basically, if a word or character already has an official localised name, then that should be the one used in the fan translation. Fans wouldn't be confused about the mix of Japanese and English names because they know that's what they're in for. But what they care about is the characters, the story, the cases. And if you know that, the names don't matter. But what does matter is that you get a more full experience if you localise what's already localised. You don't just get the drama, you get the comedy too.
But let's use an example. Let's imagine for a moment that Japan's word for step ladder meant something completely different, and it's actual word was "book" or something. Would you use "book" for all the stepladder jokes or would you use "step ladder"? Most likely you'd use step ladder since that's what fans recognise and it will lead to a lot less confusion. I think you both have valid points. Potty, you guys don't want to localise, which is fine. But Dowolf isn't saying to localise (but correct me if I'm wrong about that Dowolf). He's saying that things mentioned in other games should be kept the same in this game, the same way a delocalised GK2 would call Edgeworth Edgeworth. It's fair if you're planning to delocalise the whole series, but unless you are, I think Dowolf's idea about localising just the references is a good one and a fair one.
Sorry for the trouble. I hope you guys figure everything out!
EDIT: Wait, Dowolf? I knew I recognised that name! The guy who did a let's translate of GK2. Considering he seems to know Japanese, he could have just left it, but he translated the entire thing for the fans! I don't believe he's trying to criticise you guys, but I think he only wants what's best for the community, just like you guys. Fighting will solve nothing. If you guys work together with Dowolf, you could achieve great things (unless Dowolf's out of the translating business, which is still fine).