Well, they based their state on what they divined from the Quran, right? That certainly doesn't make them Buddhist. Regarding the "state" part, State of Palestine is also considered to be a state by many countries. Legitimacy is merely about how many people you can convince. It's not a thing you can measure with a multimeter or something.
That doesn't mean we're obligated to help them gain legitimacy by volunteering to use the name they want us to. Their goal is to be seen as a legitimate state representing all Muslims. They aren't and they don't. Also, "daesh" pisses them off, which should give all decent folk a twinge of slightly immature pleasure.
"If there isn't a population problem, why is the government putting cancer in the cigarettes?" -- the elder Steptoe, c. 1970