One issue is that the name could be a dark gray and then it would be hard to read.

One issue is that the name could be a dark gray and then it would be hard to read.

The simplest solution would be to have a subtle text-shadow or stroke around nicknames that prevents this. See the examples below. Might need a bit of tweaking but at least it would make usernames legible.

If we want to get a bit more involved, we'd need to calculate the luminance of the color when adding the username to the list and only apply stroke or text shadow to those nicknames that would be too dark.
Not a big fan of this, but it is an option.

Personally I am leaning towards the text-shadow.

css examples

without anything

shadow

.player-name {
    text-shadow: -1px -1px 0 rgb(198 198 198 / 10%),
     1px -1px 0 rgb(198 198 198 / 10%),
    -1px  1px 0 rgb(198 198 198 / 10%),
     1px  1px 0 rgb(198 198 198 / 10%);
}

stroke

.player-name {
    -webkit-text-stroke: 2px rgb(198 198 198 / 10%);
}

I'm not sure if it is something we need to address universally. We could have a preference to disable name colors in the sidebar. We already have this problem in the main chat window. I think it will generally be uncommon to see a black or dark gray name in Minecraft as it would be harder to read in game as well.

I'm not sure if it is something we need to address universally.

It is okay to say you simply don't like how my mockups look ;)

We already have this problem in the main chat window

There is no reason why we couldn't apply it to all rendered minecraft text. But sure, nothing I am too hung up on.