The rainbow flag symbol for gay pride goes back to 1978 when man named
Gilbert Baker designed such a flag for the gay & lesbian community in
San Francisco.
http://www.cs.cmu.edu/afs/cs/user/scotts/ftp/bulgarians/rainbow-flag.html
But rainbow flags have a much longer history as a general symbol for inclusiveness and diversity in many cultures around the world:
http://en.wikipedia.org/wiki/Rainbow_flag
I can understand why people might not want to use
Rainbow as a child's name because it sounds a bit "hippy" or overly "cute". But I think avoiding it because of its association with the rainbow flag is giving in to homophobia. People who would make ignorant remarks about gays to someone who names a daughter
Rainbow are jerks and should be ignored as such, IMHO.