There used to be a hack for 5.X that would allow you to force subjects not to be all caps (ie. changing "EVERYONE LOOK AT THIS" to "Everyone look at this"). I would assume that something like this might possibly be ported to the registration process. However I'm not sure - you'd have to ask in the Mods Questions forum and see what they say.
As for you manually changing their member files, they would no longer be able to log in with their other name, because logins are case sensitive. If you do decide you want to do this anyway, make sure you Rebuild Member Stat Files after you've made any manual changes, otherwise it won't recognize that member as a real member. And make sure you notify them that their login has changed as well.
---Skorpion