I think it may be the preferred nomenclature in the Muslim world since all the people who were conquered are now Muslim - so they should have an easier time accepting the fact of being Islamicized as that's their culture now (whereas bringing up the fact that they were conquered by a foreign people might stir up tensions).

I agree with you about the second point. I guess it's due to the fact that they wrote in Arabic and many of the people they actually belonged to no longer exist (for example al-Khwārizm was from a Persian family but born in what is today Uzbekistan - I actually visited his hometown :)