CWDM doee actually use with lasers in some contexts. The big difference is that CWDM uses frequencies that are all far apart, with just a few frequencies. DWDM uses frequency channels that are very close. DWDM performs better because it focuses the energy in the band's that have the best properties in terms of absorption, distortion and group delay.

Yes the "C" is for course and the "D" is for dense. All of the CWDM gear I have been exposed to was LEDs, generally actual lasers are much more expensive and you dont need that sensitivity for such loose banding. In what implementations is CWDM using lasers instead of LEDs?

CWDM uses lasers too, the reduced wavelength tolerance simply means that the lasers can be uncooled (reducing the power draw) and that chirp (frequency shift during modulation) does not cause interference with neighbouring channels, making them easier to modulate directly. The 'loose' CWDM banding is actually smaller than the bandwidth of typical LEDs.