Just remember that they wont be referred to by their middle names. So in that case their names arn't that similar.
I was prego at the same time as my cousin, my hubby and her hubby are best friends and also cousins. We were living in the same town and we had our babies 3 weeks apart, both girls. We had discussed names right through the pregnancies and DH & I were definate our girl would be called Charli, my cuz new this.
They wern't sure what they were going to call their girl, they were sure they were having a boy so I didn't know what their girls name was. She went into labour first, and even though they knew our girl was going to be Charli, they called her Zali. So we have Charli and Zali, as I wasn't going to change our name over that.
It doesn't bother me one bit that their names rhyme and we live in the same town, the bubs are best of mates and it's really cute to see them together.
Their eldest daughter is called Leila, and I actually like the name Shaila, but couldn't bring myself to call the next one that when it comes!! Imagine a Charli & Zali, Shaila & Laila... um no!
Anyway, I don't think it's such a big deal. She has a right to pick the childs name and I don't think she should not have the name she loves because of you. She would always regret that she didn't have the name she really wanted if you put a stop to it.